HAIKOU, China, Nov. 15 /Xinhua-PRNewswire/ -- Kun Run Biotechnology, Inc. (OTC Bulletin Board: KURU), a leading bio-pharmaceutical company in China that focuses on manufacture and sales of peptides and peptide-based drugs, today announced its financial results for the third quarter ended September 30, 2008.
Third Quarter 2008 Highlights
-- Revenues increased 16% from the third quarter of 2007 to a quarterly
revenue of $2.4 million
-- Gross profit was $1.8 million, compared to $1.3 million in the third
quarter of 2007
-- Operating income was $1.1 million, a increase of 41% from $793,998 in
the third quarter of 2007
-- Net income increased 50% year-over-year to $865,524, or $0.04 per basic
and fully diluted share.
Third Quarter 2008 Results
Net revenue was $2.4 million for the quarter ended September 30, 2008, up 16% from $2.1 million in the third quarter of 2007. This increase was mainly attributable to the increase in sales of our products. For the three months ended September 30, 2008, the sales of TP-5 products accounted for 48% of total sales, decreased by $0.3 million, or 20% from $1.5 million, or 71% of the total sales for the three months ended September 30, 2007. This was offset by an increase in the sales volume of our other major peptide products such as Thymosin Alpha 1, Somatostatin ("SS") and Desmopressin Acetate Injection ("DDAVP"). Within this, Thymosin Alpha 1 for injection (1.6mg) became the best selling product which produced $845,013 in revenue (34% of the total sales) for the three months ended September 30, 2008, representing a 241% increase from the same period of 2007.
Gross profit for the quarter was $1.8 million, a 31% increase from $1.3 million in the third quarter of 2007. Gross margin was 72% in the 2008 quarter, up from 63% in the same period last year. This increase was attributable to the reduction in cost of goods sold as a percentage of revenues which mainly attributed to the increased sales of high-margin products including Somatostatin, DDAVP and Thymosin a1.
Operating expenses in the September 2008 quarter were $637,324, up 17% from $542,725 in the third quarter of 2007. This increase was primarily due to our heavy investment in research and development activities and higher professional fees resulting from our status as a public company in the United States.
Operating income was $1.1 million, or 46% of revenue, an increase from $793,998, or 38% of revenue, in the third quarter of 2007 due to the factors stated above.
Net income was $865,524, or $0.04 per share (basic and diluted), compared to a net income of $576,369, or $0.02 per share (basic and diluted), in the third quarter of 2007.
Nine months Ended September 30, 2008 Results
Net revenue was $7.8 million in the quarter ended September 30, 2008, up 57% from $5.0 million in the quarter ended September 30, 2007. Gross profit margin was 71%, up from 51% in the third quarter of 2007. Such a percentage increase was mainly due to the increase in sales of higher margin non TP-5 products as a percentage of total sales and effective cost controls during the nine month period of 2008. Operating income was $1.5 million, or 20% of revenue. Net income was $3.4 million or $0.14 per basic and fully diluted share, up 250% from $1.4 million, or $0.04 per fully diluted share in the nine month period of 2007.
Financial Condition
As of September 30, 2008, the Company had $307,693 in cash and cash equivalents, $0.8 million in working capital and a current ratio 1.1:1. Kun Run generated $4.3 million in cash flow from operations in the first nine months of 2008, compared to $837,829 in the first nine months of 2007. Shareholders’ equity stood at $14.7 million, with a debt to equity ratio was 0.62 at the end of September 30, 2008.
Significant Subsequent Events
On September 25, 2008, the company completed a reverse merger with Aspen Racing Stables, Inc., and become a public company in United States trading under the ticker of "ASRS.OB"
On Nov. 6, 2008, pursuant to a Certificate of Amendment to the Company’s Articles of Incorporation, as filed with the Nevada Secretary of State on November 1, 2008, the name of the Company has been changed from Aspen Racing Stables to Kun Run Biotechnology, Inc. (hereafter "Kun Run" or the "Company"). And effectively on Nov. 6, 2008, the ticker symbol on the Over-the-Counter Bulletin Board ("OTC BB") changed from "ASRS.OB" to "KURU.OB".
On October 1, 2008, Kun Run’s newly completed manufacturing facility obtained the GMP certification and commenced production. The new manufacturing facility is located in Haikou, China, next to Kun Run’s existing facility. It is equipped with 6 production lines to produce medicines in six forms, including small volume parenteral solution, prefilled injection, tablets, freeze-dried powder injection, capsules and granules. Combined with the existing 2 freeze-dried powder injection lines, Kun Run now possesses 8 production lines in total which can support our expansion plan and new product launch activities.
"We continue to be very excited about the growth opportunities presented by the peptide market in China. During the past year, Kun Run has demonstrated success in developing and commercializing peptide medicines in the China market and has built reputable brand awareness. With the extra capacity added by the newly operated facility, we have confidence to strengthen and diversify our product portfolio in China to support the market growth. We are committed to a profitable growth strategy," remarked Mr. Ye Xiaoqun, Chief Executive Officer of Kun Run Biotechnology.
About Kun Run Biotechnology, Inc.
Kun Run Biotechnology Ltd., together with its subsidiaries, engages in manufacture and sale of polypeptide medicines. It uses solid phase peptide synthesis (SPPS) and advanced purifying technology to produce various therapeutic polypeptide drugs, of which is " TP-5" most known for efficiently regulating humans’ immune systems in order to defend and cure malignant diseases. The company maintains two state-of-art manufacturing plants and possesses one of the largest peptide synthesizing capacities across Asia.
Safe Harbor Statement
Certain statements set forth in this press release constitute "forward-looking statements." 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 are included in the Company’s filings, available via the United States Securities and Exchange Commission.
-- FINANCIAL TABLES FOLLOW --
Kun Run Biotechnology, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands of United States dollars)
September 30, December 31,
2008 2007
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $307,693 $670,919
Trade receivables (net of
allowance of doubtful accounts of
$994,380 in 2008 and $741,880 in
2007) 4,811,812 3,529,366
Income tax recoverable -- 196,065
Advances to staff 39,488 383,041
Other receivables, prepayments and
deposits 935,898 1,035,659
Inventories 652,711 527,308
Amounts due from related parties 2,617,096 --
Deferred taxes 61,057 --
Total current assets 9,425,755 6,342,358
Intangible assets 3,539 5,379
Property, plant and equipment, net 10,465,100 8,851,242
Land use rights 3,782,532 3,593,265
Deposit for acquisition of
property, plant and equipment 414,257 943,022
Deferred taxes -- 34,424
TOTAL ASSETS $24,091,183 $19,769,690
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities
Trade payables $901,526 $572,893
Other payables and accrued expenses 1,612,573 1,257,918
Dividend payable 8,123 138,659
Income tax payable 129,312 --
Amounts due to related parties 50,522 149,820
Deferred taxes -- 7,204
Secured short-term borrowings 5,852,000 1,371,000
Total current liabilities 8,554,056 3,497,494
Secured long-term bank borrowings 658,350 5,792,475
TOTAL LIABILITIES 9,212,406 9,289,969
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 134,778 103,365
STOCKHOLDERS’ EQUITY
Common stock : par value $0.001 per
share; authorized
100,000,000 shares, issued and
outstanding 25,000,000
shares in 2008 and 24,250,000
shares in 2007 25,000 24,250
Additional paid-in capital 7,683,804 7,541,074
Statutory and other reserves 1,725,313 1,725,313
Accumulated other comprehensive
income 1,516,603 742,392
Retained earnings 3,793,279 343,327
TOTAL STOCKHOLDERS’ EQUITY 14,743,999 10,376,356
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $24,091,183 $19,769,690
Kun Run Biotechnology, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands of United States dollars except per-share information)
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
2008 2007 2008 2007
Sales revenue $2,449,618 $2,114,406 $7,799,687 $4,974,279
Cost of sales (693,242) (777,683) (2,247,912) (2,107,300)
Gross profit 1,756,376 1,336,723 5,551,775 2,866,979
Operating expenses
Administrative
expenses 257,968 252,245 742,823 703,839
Research and
development costs 107,896 21,567 234,136 145,090
Selling expenses 271,460 268,913 555,540 668,392
637,324 542,725 1,532,499 1,517,321
Income from operations 1,119,052 793,998 4,019,276 1,349,658
Interest income 374 389 1,516 2,241
Other income 63,312 19,663 165,908 38,272
Government subsidy
income 104 55 9,729 7,838
Finance costs (140,690) (146,885) (415,311) (386,109)
Income before income
taxes 1,042,152 667,220 3,781,118 1,011,900
Income taxes (168,803) (85,731) (300,383) (141,737)
Minority interests (7,825) (5,120) (30,783) (7,660)
Net income $865,524 $576,369 $3,449,952 $862,503
Other comprehensive
income
Foreign currency
translation
adjustments 27,413 191,057 774,211 529,178
Total comprehensive
income $892,937 $767,426 $4,224,163 $1,391,681
Earnings per share :
Basic and diluted $0.04 $0.02 $0.14 $0.04
Weighted average
number of shares
outstanding :-
Basic and diluted 24,372,284 24,250,000 24,291,058 24,250,000
Kun Run Biotechnology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In thousands of United States dollars)
Nine months ended
September 30
(Unaudited)
2008 2007
Cash flows from operating activities
Net income $3,449,953 $862,503
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation 498,686 370,473
Amortization of intangible assets and
land use rights 52,976 1,965
Deferred taxes (31,370) (45,089)
Written off of property, plant and
equipment 5,564 --
Provision for doubtful debts 198,657 262,283
Minority interest 30,783 7,660
Changes in operating assets and
liabilities :-
Trade receivables (1,223,326) (1,197,265)
Other receivables, prepayments and
deposits 165,869 (53,319)
Advances to staff 361,861 (49,997)
Inventories (88,215) 621,104
Trade payables 284,377 (57,994)
Other payables and accrued expenses 239,722 10,175
Income tax payable -- 105,330
Income tax recoverable 331,753 --
Net cash flows provided by operating
activities 4,277,290 837,829
Cash flows from investing activities
Payments to acquire and deposit for
acquisition of
property, plant and equipment (923,536) (941,971)
Cash acquired from RTO 164,437 --
Net cash flows used in investing
activities (759,099) (941,971)
