LAIYANG, China, Sept. 30 /Xinhua-PRNewswire/ -- Genesis Pharmaceuticals Enterprises, Inc. (OTC Bulletin Board: GNPH) ("Genesis" or the "Company"), a U.S. pharmaceutical company with its principal operations in the People’s Republic of China, today announced its financial results for its fourth quarter and fiscal year ended June 30, 2008. A 10-K Form was filed for the year with the U.S. Securities Exchange Commission that is available through the Company’s website and from the SEC.
Fourth Quarter FY 2008 Highlights
-- Revenue was $28.3 million, up 39.0% from the corresponding quarter in
2007
-- Gross profit was $23.5 million, up 57.7% from the corresponding
quarter in 2007, and gross margin was 83.2%, compared to 73.3% in the
corresponding quarter in 2007
-- Operating income was $10.1 million, up 42.2% from the corresponding
quarter in 2007
-- Net income was $9.6 million, compared to $14.6 million in the
corresponding quarter in 2007
Fiscal Year 2008 Highlights:
-- Revenue was $99.5 million, up 30.6% from the year ended June 30, 2007
-- Gross profit was $77.0 million, up 40.0% from the year ended June 30,
2007, and gross margin was 77.4%, compared to 72.2% in the year ended
June 30, 2007
-- Operating income was $32.2 million, up 75.9% from the year ended June
30, 2007
-- Net income was $22.5 million, up 1.8% from the year ended June 30,
2007, with earnings of $1.84 per diluted share
-- Completed private placements for a total of $35 million of convertible
notes and 2,275,000 warrants
-- Began manufacturing and distributing Baobaole chewable tablets, a
Traditional Chinese Medicine
"Genesis had a strong fourth quarter and spent this past year establishing its financial performance, putting a growth strategy into place, and expanding its marketing and sales efforts. Our product line was strengthened by the introduction of Baobaole chewable tablets, a new over the counter drug which is sold directly to pharmacies and has a high profit margin," said Mr. Wubo Cao, Chairman and CEO of Genesis Pharmaceuticals Enterprises, Inc. "We plan to build on the solid performance that we were able to achieve in fiscal year 2008."
Fourth Quarter of Fiscal Year 2008 Results
Total revenue in the fourth quarter ended June 30, 2008 was $28.3 million, up 39.0% from $20.4 million in the prior year’s corresponding period. This increase in revenue was due to sales of the Company’s new Baobaole chewable tablets (which were not available for sale in the prior year’s corresponding period), along with sustained sales of the Company’s most popular products, Clarithromycin sustained-release tablets and Itopride Hydrochloride Granules.
Gross profit in the fourth quarter ended June 30, 2008 was $23.5 million, an increase of 57.7% from $14.9 million in the prior year’s corresponding period. Gross margin was 83.2%, compared to 73.3% in the prior year’s corresponding period. This increase in gross profit was due to rapidly growing sales of Baobaole chewable tablets.
Selling, general and administrative expenses in the fourth quarter ended June 30, 2008 were $12.3 million, up 73.9% from $7.1 million in the prior year’s corresponding period. Higher expenses in 2008 were principally because of higher commission expenses paid to sales personnel, higher advertising, marketing and promotion spending and salaries, wages and related benefits expenses, and expenses related to being a public company.
Operating income in the fourth quarter ended June 30, 2008 was $10.1 million, with an operating margin of 35.8%, a 42.2% increase from $7.1 million in the prior year’s corresponding period.
Net income for the quarter ended June 30, 2008 was $9.6 million, compared to $14.6 million in the prior year’s period. Net income decreased because non-operating income declined to $1.4 million in the quarter ended June 30, 2008 from $6.6 million in the prior year’s corresponding period. Part of this decrease was due to a decrease in a tax exemption that declined to $5.3 million in the fourth quarter of fiscal year 2008 from $9.9 million in the prior year’s corresponding quarter. Also, a non-cash debt amortization expense of approximately $2.5 million took place in the fourth quarter of 2008, for which there was no similar expense the prior year’s corresponding quarter.
Full Fiscal Year Operating Highlights
Total revenue for fiscal year 2008 was $99.5 million, up 30.6% from $76.2 million in the twelve month period ended June 30, 2007. Gross profit was $77.0 million, up 40.0% from $55.0 million in the twelve month period ended June 30, 2007. Gross margin was 77.4%, up from 72.2% in the twelve month period ended June 30, 2007. Operating income totaled $32.2 million, a 75.9% increase from $18.3 million in the twelve month period ended June 30, 2007. The Company’s operating margin was 32.4%, up from 24.0% in the prior year’s period. Net income for fiscal year 2008 was $22.5 million, with net margin of 22.6%, a 1.8% increase from $22.1 million, with net margin of 28.9% in the twelve month period ended June 30, 2007. Net margin decreased primarily because of higher selling, general and administrative expenses as a percentage of sales and no longer having a significant tax exemption received in 2007. After giving effect to a one for forty reverse split, net income was $2.45 per basic share and $1.84 per fully diluted share in fiscal year 2008, compared to $2.94 per basic and fully diluted share in the twelve month period ended June 30, 2007.
Adjusting for a recent one for forty reverse split for its shares, there were 10,327,844 outstanding shares of common stock as of June 30, 2008. Of those shares, 560,000 shares are not considered issued and outstanding for earnings per share calculations as of at June 30, 2008 because the issuance of those shares is contingent on the occurrence of certain future events.
Financial Condition
As of June 30, 2008, the Company had $48.2 million in cash and an additional $7.8 million in restricted cash. Working capital was $73.2 million, up from $16.0 million as of June 30, 2007. This increase was primarily due to an increase in cash, investments and accounts receivable as well as decreases in short term bank loans and dividends payable. Current liabilities were $16.4 million and long-term debt consisted of $2.5 million in convertible debt. Shareholder’s equity was $95.5 million. Future contractual obligations in fiscal 2009 include $8.6 million in bank indebtedness and $4.4 million in research and development contractual agreements. The Company generated $17.1 million in cash flow from operating activities in fiscal 2008. The Company invested $8.9 million in intangible assets consisting mostly of land use rights and the rights to develop, manufacture and distribute new drugs.
Recent Events
In June 2008, the Board of Directors appointed a new independent board member. The Board of Directors also established an independent Audit Committee and a Compensation Committee.
In July 2008, the Company received approval from the Chinese State Food and Drug Administration ("SFDA") to start producing and distributing Radix Isatidis Dispersible Tablets, an herbal-based traditional Chinese medicine used for viral influenza. Sales in China will begin in October.
Business Outlook and Guidance
"We are pleased to report that we recently added a new over the counter drug, Radix Isatidis Dispersible Tablets, to our product line. We began selling significant amounts of Radix Isatidis Dispersible Tablets immediately after we received our final approvals from the SFDA. We have three other drugs waiting for approval from the SFDA which we hope will be approved in fiscal year 2009 and will find similar market success. We expect sales of our current popular products to continue growing because of increased branding and greater marketing efforts," said Mr. Cao. "Throughout this last year we took a number of steps to improve our corporate governance. This included adding an independent member to our Board, adopting a code of business conduct and ethics, and establishing an audit committee and a compensation committee. These steps are a part of preparing the Company for its applying to have its shares listed on a senior securities exchange."
"Because of our strong financial performance throughout fiscal 2008 and our expectations of expanding our product line and increasing sales throughout the upcoming year, as guidance, we expect revenue for fiscal 2009 to be from $122 to $130 million, and operating income to be from $40 to $43 million. These guidance numbers are subject to change, and are based on our ability to grow our business in the future in the same way as we have in the past," concluded Mr. Cao.
Conference Call
Genesis Pharmaceuticals Enterprises, Inc. management will host a conference call at 9:00 a.m. Eastern on Wednesday, October 1, 2008 to discuss financial results for the fiscal year ended June 30, 2008. The conference call will include Mr. Wubo Cao, Chairman and Ms. Elsa Sung, CFO. To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 419-5570. International callers should call (617) 896-9871. The Conference Passcode is 375 022 62. If you are unable to participate in the call at that time, replay of the conference call will be available from Wednesday, October 1 at 11:00 a.m. Eastern until Wednesday, October 15. To access the replay, call (888) 286-8010. International callers should call (617) 801-6888. The Conference Passcode is 31221366.
About Genesis Pharmaceuticals Enterprises, Inc.
Genesis Pharmaceuticals Enterprises, Inc. is a U.S. public company engaged in the research, development, production, marketing and sales of pharmaceutical products in the People’s Republic of China. Its operations are located in Northeast China in an Economic Development Zone in Laiyang City, Shandong province. Genesis is a pharmaceutical company in China producing western and Chinese herbal-based medical drugs in tablet, capsule, and granule form.
Safe Harbor Statement
Certain statements in this press release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the Company’s actual results and financial position to differ materially from those included within the forward-looking statements. Forward-looking statements involve risks and uncertainties, including those relating to the Company’s ability to introduce, manufacture and distribute new drugs. Actual results may differ materially from predicted results, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company’s ability to obtain raw materials needed in manufacturing, the continuing employment of key employees, the failure risks inherent in testing any new drug, the possibility that regulatory approvals may be delayed or become unavailable, patent or licensing concerns that may include litigation, direct competition from other manufacturers and product obsolescence. More information about the potential factors that could affect the Company’s business and financial results is included in the Company’s filings, available via the United States Securities and Exchange Commission.
- Financial Statements Follow -
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND YEAR ENDED JUNE 30, 2008 AND 2007
Three Months Ended Year Ended
June 30 June 30
2008 2007 2008 2007
REVENUES:
Sales 27,334,356 19,383,730 93,982,407 72,259,812
Sales - related party 952,249 970,010 5,564,098 3,933,881
TOTAL REVENUE 28,286,605 20,353,740 99,546,505 76,193,693
COST OF SALES 4,762,168 5,437,483 22,506,547 21,161,530
GROSS PROFIT 23,524,437 14,916,257 77,039,958 55,032,163
RESEARCH AND
DEVELOPMENT EXPENSE 1,065,475 702,770 3,235,715 11,143,830
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,323,867 7,088,057 41,593,197 25,579,361
INCOME FROM OPERATIONS 10,135,095 7,125,430 32,211,046 18,308,972
OTHER (INCOME)
EXPENSE, NET
Other expense, net (428,196) - 708,338 -
Non-operating
(income) expense (1,391,069) (6,592,598) (1,391,301) (6,586,956)
Interest expense, net 2,166,190 6,945 3,092,183 211,616
Loss from
discontinued
business 38,284 380,027 -
OTHER EXPENSE, NET 385,209 (6,585,653) 2,789,247 (6,375,340)
INCOME BEFORE
PROVISION FOR INCOME
TAXES 9,749,886 13,711,083 29,421,799 24,684,312
PROVISION FOR INCOME
TAXES 162,114 (936,601) 6,970,739 2,631,256
NET INCOME 9,587,772 14,647,684 22,451,060 22,053,056
OTHER COMPREHENSIVE
INCOME:
Unrealized (loss)
gain on marketable
securities - - 1,347,852 -
Foreign currency
translation
adjustment 1,777,833 345,083 5,206,612 1,018,130
COMPREHENSIVE INCOME $11,365,605 $14,992,767 29,005,524 23,071,186
WEIGHTED AVERAGE
NUMBER OF SHARES:
Basic 7,310,665 7,494,740
Diluted 7,884,370 7,494,740
EARNINGS PER SHARE:
Basic $2.45 $2.94
Diluted $1.84 $2.94
Earnings Per Share are Adjusted to Reflect a Recent Share Split
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2008 AND 2007
A S S E T S
2008 2007
CURRENT ASSETS:
Cash $48,195,798 $17,737,208
Restricted cash 7,839,785 8,410,740
Investments 2,055,241 -
Accounts receivable, net of
allowance for doubtful accounts
of $155,662 and $166,696 as of
June 30, 2008 and 2007, respectively 24,312,077 11,825,442
Accounts receivable - related parties 673,808 498,940
Notes receivables - 57,965
Inventories 3,906,174 5,130,934
Other receivables 152,469 23,623
Advances to suppliers 1,718,504 313,018
Financing costs - current 680,303 -
Other assets - 100,968
Total current assets 89,534,159 44,098,838
PLANT AND EQUIPMENT, net 11,225,844 10,179,134
OTHER ASSETS:
Restricted investments 2,481,413 -
Financing costs, net 1,236,641 -
Intangible assets, net 9,916,801 1,119,087
Total other assets 13,634,855 1,119,087
Total assets $114,394,858 $55,397,059
L I A B I L I T I E S A N D
S H A R E H O L D E R S’ E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $2,341,812 $2,051,506
Short term bank loans 2,772,100 4,602,500
Notes payable 5,843,295 8,410,740
Other payables 3,671,703 1,367,052
Other payables - related parties 164,137 933,132
Accrued liabilities 334,439 216,468
Liabilities assumed
from reorganization 1,084,427 -
Dividends payable - 10,520,000
Taxes payable 166,433 -
Total current liabilities 16,378,346 28,101,398
CONVERTIBLE DEBT, net of discount
$33,078,704 and $0 as of June 30,
2008 and 2007, respectively 2,500,043 -
Total liabilities 18,878,389 28,101,398
COMMITMENTS AND CONTINGENCIES AND
SUBSEQUENT EVENTS
SHAREHOLDERS’ EQUITY:
Convertible preferred stock Series A
($0.001 par value; 0 and 218,000
shares authorized; 0 shares issued
and outstanding as of June 30,
2008 and 2007 - -
Common Stock ($0.001 par value,
15,000,000 shares, 9,767,844 and
7,494,740 shares issued and
outstanding) 9,770 7,495
Treasury stock - (2,805)
Paid-in-capital 45,554,513 18,344,309
Capital contribution receivable (11,000) (12,011,000)
Retained earnings 39,008,403 17,653,584
Statutory reserves 3,253,878 2,157,637
Accumulated other
comprehensive income 7,700,905 1,146,441
Total shareholders’ equity 95,516,469 27,295,661
Total liabilities and
shareholders’ equity $114,394,858 $55,397,059
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2008, 2007 AND 2006
2008 2007 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $22,451,060 $22,053,056 $7,736,167
Loss from discontinued operations 380,027 - -
Income from continued operations 22,831,087 22,053,056 7,736,167
Adjustments to reconcile net
income to cash provided by
(used in) operating activities:
Depreciation 517,863 364,417 255,602
Amortization of intangible
assets 184,465 122,126 111,786
Amortization of debt issuance
costs 123,964 -
Amortization of debt discount 2,500,043 -
Bad debt expense (recovery) (27,641) 157,214
Loss on sale of marketable
securities - -
Unrealized loss on marketable
securities 696,528 -
Common stock issued for
services 46,994
Amortization of stock option
compensation 10,847 -
Gain on debt early
distinguish (86,752) -
Change in operating assets and
liabilities
Accounts receivable (10,534,270) (1,534,814) (6,945,531)
Accounts receivable - related
parties (113,465) (62,599) (12,538)
Notes receivables 60,694 (26,626) (28,888)
Inventories 1,686,090 1,727,215 (3,680,020)
Other receivables (111,571) (20,889) 3,359
Other receivables - related
parties - - -
Advances to suppliers (1,259,254) (66,821) 264,641
Other assets 92,996 1,563,800 (1,445,205)
Accounts payable 55,085 (2,027,968) 764,749
Accrued liabilities 211,362 45,567 70,348
Other payables 2,033,689 (827,498) (630,146)
Other payables - related
parties (822,155) (3,848,086) (1,470,501)
Liabilities from discontinued
operations (1,172,816) - -
Taxes payable 169,790 (2,168,912) 1,905,120
Net cash provided by (used
in) operating activities 17,093,573 15,291,968 (2,943,843)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of marketable
securities 1,034,028 - -
Proceeds from sale of restricted
securities 155,000 - -
Purchase of equipment (453,718) (183,237) (531,890)
Purchase of intangible assets (8,870,631) - (34,106)
Capital contribution - -
Investment in subsidiary - -
Cash receipt from reverse
acquisition 534,950 - -
Net cash used in investing
activities (7,600,371) (183,237) (565,996)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Restricted cash 3,292,168 435,022 (4,544,212)
Principal payments on notes
payable (3,292,168) (435,022) 4,544,294
Borrowings on short term loan 2,616,110 4,471,600 5,568,750
Principal payments on short term
loan (4,819,150) (5,688,450) -
Proceeds from sale of common
stock 337,500 - -
Proceeds from sale of treasury
stock 1,975 - -
Payment to escrow account (1,996,490) - -
Payments for dividend (10,608,000) - -
Proceeds from convertible debt 32,974,500 - -
Payments for debt issuance cost (15,408) - -
Proceeds from bank loans - - -
Proceed from officers - - -
Payment for officers - - -
Net cash provided by (used
in) financing activities 18,491,037 (1,216,850) 5,568,832
EFFECTS OF EXCHANGE RATE CHANGE
IN CASH 2,474,351 473,729 74,821
NET INCREASE IN CASH 30,458,590 14,365,610 2,133,814
CASH, beginning of the year 17,737,208 3,371,598 1,237,784
CASH, end of the year $48,195,798 $17,737,208 $3,371,598
