LAIYANG, China, Nov. 17 /Xinhua-PRNewswire-FirstCall/ -- 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 first quarter of fiscal year 2009 ended September 30, 2008.
First Quarter of FY 2009 Highlights
-- Revenue was $27.6 million, up 65.9% from the corresponding quarter
ended September 30, 2007
-- Gross profit was $21.8 million, up 81.3% from the corresponding quarter
ended September 30, 2007, and gross margin was 79.1%, compared to 72.4%
in the corresponding quarter ended September 30, 2007
-- Operating income was $7.3 million, up 48.9% from the corresponding
quarter ended September 30, 2007
-- Net income was $3.1 million, compared to $3.2 million in the
corresponding quarter ended September 30, 2007
-- In July 2008, the Company received approval from the Chinese State Food
and Drug Administration to start producing and distributing Radix
Isatidis Dispersible Tablets, an herbal-based traditional Chinese
medicine used for viral influenza
-- On September 4, 2008, the Company completed a 40-for-1 reverse stock
split of its common stock and began trading under the symbol "GNPH"
-- The Company received purchase orders for a total value of approximately
$12 million over the next 12 months from over 80 wholesale distributors
at the 43rd Annual New Drugs Conference sponsored by China Health Tech
Forum 2008
"Genesis had a good first quarter because of our on-going marketing and sales efforts. Baobaole Chewable tablets continued to generate strong sales, and we recently started selling a new product, Radix Isatidis Dispersible Tablets, which is used to treat cold and flu symptoms," said Mr. Wubo Cao, Chairman and CEO of Genesis. "We expect to continue to expand our marketing and sales efforts and continue to explore opportunities to acquire, manufacture and sell new products in order to further develop shareholder value throughout the rest of fiscal year 2009."
First Quarter of Fiscal Year 2009 Results
Total revenue from sales and sales to related parties totaled $27.6 million for the three months ended September 30, 2008, up 65.9% to $16.6 million for the three months ended September 30, 2007. Revenues increased because of strong sales of the Company's two products, Itopride Hydrochloride Granules and Baobaole chewable tablets, a product which was successfully launched in the second quarter of fiscal year 2008.
Gross profit in the first quarter of fiscal year 2009 was $21.8 million, an increase of 81.3% from $12.0 million for the prior year's corresponding period. Gross margin increased 79.1%, up from 72.4% for the prior year's corresponding period. Gross margin increased because of increased sales of higher margin products, especially Baobaole chewable tables, more efficient production and well managed purchases of raw materials.
Research and development costs totaled $1.1 million for the three months ended September 30, 2008, compared to $0.3 million for the three months ended September 30, 2007. This increase was due to two new cooperative research and development agreements that were signed in the latter part of fiscal 2008. The Company began making monthly payments to support university research and development projects.
Selling, general and administrative expenses were $13.4 million for the three months ended September 30, 2008, up 95.7% from $6.8 million in the three months ended September 30, 2007. Salaries, wages and related benefits increased $8.6 million primarily because of an increase in the Company's number of employees and higher commissions as a percentage of sales paid to sales representatives. Other factors for the increase in selling, general and administrative expenses included higher advertising, marketing and promotion expenditures, and costs related to being a public company.
Income from operations was $7.3 million for the three months ended September 30, 2008, a 48.9% increase from $4.9 million for the three months ended September 30, 2007.
Although the Company had a $2.4 million increase in income from operations, other expenses increased by $2.1 million. Net income for the three months ended September 30, 2008 was $3.1 million, compared to $3.2 million for the three months ended September 30, 2007. Excluding an unrealized loss on security investments of $1.0 million and a non-cash charge for amortization of discounts on convertible debt of $0.7 million, adjusted net income for the three months ended September 30, 2008 was $4.8 million or $0.49 per fully diluted share, which translates to a 49.5% increase in non-GAAP net income for the three months ended September 30, 2008 compared to the same period last year.
Management believes that operating income will grow and net income will improve in the remainder of fiscal year 2009 as the Company will continue to strengthen its sales efforts, offer new products, improve manufacturing efficiency and more closely control spending.
Financial Condition
As of September 30, 2008, the Company had $61.3 million in cash. Working capital was $77.4 million, up from $73.2 million as of June 30, 2008. Current liabilities were $23.4 million and long-term debt consisted of $3.2 million in convertible debt. Shareholders' equity was $97.4 million. Future contractual obligations within one year period include $7.9 million in bank debt and $4.4 million in research and development contractual agreements. The Company generated $13.7 million in cash flow from operating activities in the first quarter of fiscal year 2009. Management believes that its strong cash position will sustain the Company's future cash needs and will enable the Company to successfully implement its growth strategies.
Recent Events
-- The Company started sales of Radix Isatidis Dispersible Tablets in
October 2008. This drug is expected to become a popular remedy for
cold and flu symptoms.
-- In early November of 2008, the Company launched a new corporate website
with the domain address http://www.genesispharmaceuticals.com .
Business Outlook and Guidance
"Part of our current growth strategy includes developing and implementing a systematic marketing strategy through which we hope to develop our presence in China's rural markets. We believe that rural China offers us good growth potential because the Chinese government actively supports better health care in rural areas. We are currently also exploring acquisition opportunities through which we expect to quickly increase our portfolio of products," said Mr. Cao. "Regarding corporate governance, we are in the process of selecting and engaging a professional consulting company to help us meet the requirements of the Sarbanes-Oxley Act of 2002. The improvements we want to bring to our corporate governance are guided by the requirements for applying to a senior U.S. stock exchange. We hope to apply to a senior U.S. stock exchange in the near future in order to increase visibility and liquidity for our shares, and value for our shareholders."
"Sales have grown quickly for Baobaole Chewable Tablets, Radix Isatidis Dispersible Tablets have found rapid market acceptance, and we expect to expand our product line in the near future. We continue to be confident that we will meet our fiscal year 2009 guidance," concluded Mr. Cao. "We expect revenue for fiscal 2009 to be from $122.0 to $130.0 million, and operating income to be from $40.0 to $43.0 million."
Conference Call
Genesis Pharmaceuticals Enterprises, Inc. management will host a conference call at 10:00 a.m. Eastern Time on Monday, November 17, 2008 to discuss financial results for the quarter ended September 30, 2008. Mr. Wubo Cao, Chairman & CEO of Genesis, Ms. Elsa Sung, CFO of Genesis and Ms. Hong Xue, Financial Controller of Genesis will be present at the conference call. To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time of 9:00 a.m. Eastern Time on Monday, November 17, 2008: (888) 419-5570. International callers should call (617) 896-9871. The Conference Passcode is 684 940 06. If you are unable to participate in the call at that time, replay of the conference call will be available from Monday, November 17, 2008 at 11:00 a.m. Eastern until Monday, December 1, 2008. To access the replay, call (888)
286-8010. International callers should call (617) 801-6888. The Conference Passcode is: 396 547 67.
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 ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
2008 2007
REVENUES:
Sales $27,320,750 $15,262,789
Sales - related parties 243,843 1,348,095
TOTAL REVENUE 27,564,593 16,610,884
Cost of sales 5,713,059 4,205,945
Cost of sales - related parties 54,478 384,169
COST OF SALES 5,767,537 4,590,114
GROSS PROFIT 21,797,056 12,020,770
RESEARCH AND DEVELOPMENT EXPENSE 1,097,925 264,920
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 13,351,975 6,821,416
INCOME FROM OPERATIONS 7,347,156 4,934,434
OTHER (INCOME) EXPENSE:
Other expense, net 914,970 12,678
Other (income) - related parties (143,950) (26,492)
Non-operating expense 74,621 59,903
Interest expense, net 1,352,794 60,000
Loss from discontinued operations 45,216 --
OTHER EXPENSE, NET 2,243,651 106,089
INCOME BEFORE PROVISION FOR
INCOME TAXES 5,103,505 4,828,345
PROVISION FOR INCOME TAXES 1,970,021 1,593,353
NET INCOME 3,133,484 3,234,992
OTHER COMPREHENSIVE INCOME:
Foreign currency translation
adjustment 330,641 417,346
Unrealized Holding (Loss) (1,562,967) --
COMPREHENSIVE INCOME $1,901,158 $3,652,338
BASIC WEIGHTED AVERAGE NUMBER
OF SHARES 9,769,329 7,494,740
BASIC EARNING PER SHARE $0.32 $0.43
DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES 9,861,671 7,494,740
DILUTED EARNING PER SHARE $0.32 $0.43
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
2008 2008
(Unaudited)
A S S E T S
CURRENT ASSETS:
Cash $61,269,936 $48,195,798
Restricted cash 7,894,348 7,839,785
Investment 886,509 2,055,241
Accounts receivable, net of allowance
for doubtful accounts of $219,400
and $155,662, respectively 25,354,209 24,312,077
Accounts receivable - related parties 187,509 673,808
Inventories 3,066,280 3,906,174
Other receivables 192,954 152,469
Other receivables - related parties 377,941 --
Advances to suppliers and other assets 892,489 1,718,504
Total current assets 100,122,175 88,853,856
PLANT AND EQUIPMENT, net 11,129,878 11,225,844
OTHER ASSETS:
Restricted investments 1,078,875 2,481,413
Financing cost, net 1,746,868 1,916,944
Intangible assets, net 9,870,494 9,916,801
Total other assets 12,696,237 14,315,158
Total assets $123,948,290 $114,394,858
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 $2,536,337 $2,341,812
Short term bank loans -- 2,772,100
Notes payable 7,894,348 5,843,295
Other payables 4,583,078 3,671,703
Other payables - related parties 391,723 164,137
Accrued liabilities 954,231 334,439
Liabilities assumed from
reorganization 552,220 1,084,427
Taxes payable 6,452,277 166,433
Total current liabilities 23,364,214 16,378,346
CONVERTIBLE DEBT, net of discount of
$31,837,406 and $32,499,957 as of
September 30, 2008 and June 30, 2008,
respectively 3,162,594 2,500,043
Total Liabilities 26,526,808 18,878,389
COMMITMENTS AND CONTINGENCIES AND
SUBSEQUENT EVENT -- --
SHAREHOLDERS' EQUITY:
Preferred stock ($0.001 par value;
20,000,000 shares authorized;
none issued, or outstanding) -- --
Common stock ($0.001 par value,
22,500,000 and 15,000,000 shares
authorized, respectively;
9,771,448 and 9,767,844 shares
issued and outstanding, respectively) 9,773 9,770
Paid-in-capital 73,392,365 45,554,513
Capital contribution receivable (27,845,000) (11,000)
Retained earnings 41,550,881 39,008,403
Statutory reserves 3,844,884 3,253,878
Accumulated other comprehensive
income 6,468,579 7,700,905
Total shareholders' equity 97,421,482 95,516,469
Total liabilities and
shareholders' equity $123,948,290 $114,394,858
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
2008 2007
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $3,133,484 $3,234,992
Loss from discontinued operations (45,216) --
Income from continued operations 3,178,700 3,234,992
Adjustments to reconcile net
income to cash provided by (used in)
operating activities:
Depreciation 146,694 111,356
Amortization of intangible
assets 73,540 31,521
Amortization of debt issuance
costs 170,076 --
Amortization of debt discount 662,551 --
Bad debt expense 63,350 --
Gain on sale of marketable
securities (124,523) --
Unrealized loss on trading
securities 1,044,083 --
Other non-cash settlement (20,000) --
Stock-based compensation 23,854 --
Change in operating assets and
liabilities
Accounts receivable (1,039,428) (3,173,544)
Accounts receivable - related
parties 488,446 (1,213,279)
Notes receivables -- 19,046
Inventories 851,126 (354,330)
Other receivables (48,205) (334,460)
Other receivables- related
parties (378,174) --
Advances to suppliers and
other assets 839,097 (3,858,910)
Accounts payable 188,211 (1,385,815)
Other payables 901,863 (1,091,944)
Other payables - related
parties 227,135 --
Accrued liabilities 670,516 55,947
Liabilities assumed from
reorganization (532,207) --
Taxes payable 6,289,257 4,719,062
Net cash provided by
(used in) operating
activities 13,675,963 (3,240,358)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sales of marketable
securities 88,743 --
Acquisition of equipment (19,877) (20,723)
Net cash provided by
(used in) investing
activities 68,866 (20,723)
CASH FLOWS FINANCING ACTIVITIES:
Payments for dividend -- (10,596,800)
Proceeds from bank loans -- 3,179,040
Principal payments on short term
bank loans (2,781,410) (2,649,200)
Proceeds from notes payable 2,036,285 --
Principal payments on notes
payable -- (2,906,702)
(Decrease) Increase in restricted
cash (39,795) 2,906,702
Net cash used in
financing activities (784,920) (10,066,960)
EFFECTS OF EXCHANGE RATE CHANGE IN
CASH 114,229 161,697
INCREASE (DECREASE) IN CASH 13,074,138 (13,166,344)
CASH, beginning of period 48,195,798 17,737,208
CASH, end of period $61,269,936 $4,570,864
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP NET INCOME
Three Months Ended
September 30September 30
2008 2007
Net Income 3,133,484 3,234,992
Unrealized loss on trading securities 1,044,083 --
Amortization of debt discount 662,551 --
Adjusted Net Income 4,840,118 3,234,992
Adjusted Earnings Per Weighted
Average Number of Shares $0.49 $0.43
Weighted Average Number of Shares 9,861,671 7,494,740
Non-GAAP Net Income and Adjusted Earnings per Share are calculated
to compare the effect of expenses that did not previously exist
For more information, please contact:
Genesis Pharmaceuticals Enterprises, Inc.
Ms. Elsa Sung CFO
Tel: +1-954-727-8435
Email: elsasung@jiangbo.com
Web: http://www.genesispharmaceuticals.com
CCG Investor Relations, Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com