First Quarter 2007 Net Income Increased 155.6% Year-over-Year
NANJING, China, May 16 /Xinhua-PRNewswire/ -- Simcere Pharmaceutical Group
(NYSE: SCR), a leading manufacturer and supplier of branded generic
pharmaceuticals in China, today reported unaudited financial results for the
first quarter ended March 31, 2007.
First Quarter 2007 Highlights
-- Total revenues increased 31.7% year-over-year to RMB 312.3 million
(US$ 40.4 million);
-- Net income increased 155.6% to RMB 66.9 million (US$ 8.7 million) in
the first quarter of 2007 from RMB 26.2 million in the same period a
year ago; and
-- Gross margin increased to 81.7 % for the first quarter of 2007 from
78.8% in the same period a year ago. The improvement in gross margin
reflects increased revenue contribution from higher gross margin
products and continued stabilization of cost of sales.
"We are pleased to report strong results for the first quarter of 2007,"
said Mr. Jinsheng Ren, Chairman and CEO of Simcere Pharmaceutical Group.
"During the first quarter, we continued to enhance our market position through
expanding hospital coverage and channel penetration. For example, in order to
deepen the market penetration of Bicun, we hosted about 100 medical seminars
across China and generated increasing awareness of Bicun among doctors. By the
end of the first quarter, Bicun had been prescribed by approximately 1,000
hospitals in China. In the first quarter, we were able to increase Endu's
coverage in more than 100 hospitals. As of March 31, 2007, there were more
than 500 hospitals prescribing Endu to treat their cancer patients."
Mr. Ren continued, "Progress made in the development of pipeline products
and extended clinical trials for Endu was in line with our expectation. We aim
to obtain the SFDA approval for two of our pipeline products, Biapenem and
Palonosetron, during the fourth quarter of 2007 and first half of 2008,
respectively."
Mr. Ren concluded, "Our growth in both total revenues and net income is a
validation of our strengthened and improved business model, which aims to
focus our resources on first-to-market and new drugs. On April 25, 2007, we
successfully completed our initial public offering. We believe that, with the
superior capital strength obtained from this offering, we are well-positioned
to leverage our strong product development capabilities and well-established
nationwide sales and distribution network to emerge as a leader in the
pharmaceutical industry in China."
Mr. Frank Zhao, CFO of Simcere Pharmaceutical Group, commented, "Strong
revenue growth of our first-to-market branded generic drug Bicun and our new
anti-cancer drug Endu contributed greatly to our first quarter financial
result. Our successful initial public offering further strengthened our cash
position and will broaden our acquisition opportunities for business or
products with great commercialization potential."
First Quarter 2007 Financial Results
Total revenues for the first quarter of 2007 were RMB 312.3 million (US$
40.4 million), representing an increase of 31.7% from RMB 237.1 million
reported for the same period in 2006;
Revenues from top five branded generic pharmaceutical products for the
first quarter of 2007 totaled RMB 238.6 million (US$ 30.9 million),
contributing 76.4% of the Company's total revenues and representing an
increase of 19.9% from RMB 198.9 million for the same period in 2006;
Revenue from Endu, the Company's first anti-cancer drug launched in July
2006, totaled RMB 39.0 million (US$ 5.1 million) in the first quarter of 2007,
representing 12.5% of the Company's total revenue.
Gross margin for the first quarter of 2007 was 81.7%, as compared to 78.8
% in the corresponding period a year ago. The higher gross margin was
primarily due to the continued sales growth of higher margin products Bicun
and Endu.
Research and development expenses in the first quarter of 2007 totaled RMB
13.7 million (US$ 1.8 million), an increase of 19.5% from RMB 11.5 million for
the corresponding period a year ago;
Sales and marketing expenses were RMB 136.3 million (US$ 17.6 million) for
the first quarter of 2007, an increase of 25.9 % from RMB 108.3 million for
the corresponding period a year ago. The increase was directly related to the
increase of sales;
General and administrative expenses were RMB 30.9 million (US$ 4.0
million) for the first quarter of 2007, an increase of 14.6% from RMB 27.0
million for the corresponding period a year ago.
Share-based compensation expenses, which were allocated to research and
development expenses, sales and marketing expenses, and general and
administrative expenses, respectively, based on the nature of the work the
Company's employees were assigned to perform, totaled RMB 6.8 million (US$ 0.9
million ) for the first quarter of 2007.
Operating income was RMB 74.0 million (US$ 9.6 million) for the first
quarter of 2007, as compared to RMB 40.0 million for the corresponding period
of 2006.
Interest expense was RMB 4.0 million (US$ 0.5 million) for the first
quarter of 2007, compared to RMB 2.4 million for the corresponding period a
year ago. The higher interest expense is due to the increased average balance
of the Company's short-term loan for the first quarter of 2007.
Net income was RMB 66.9 million (US$ 8.7 million) for the first quarter
of 2007, compared to RMB 26.2 million in the corresponding period a year ago.
The Company's net margin increased to 21.4% for the first quarter of 2007
compared to 11.0% for the corresponding period a year ago.
The basic earnings per ADS for the first quarter of 2007 was RMB 1.34 (US$
0.17), the diluted earnings per ADS for the first quarter of 2007 was RMB 1.30
(US$ 0.17), compared to basic and diluted earnings per ADS of RMB 0.74 for the
corresponding period a year ago. 1 ADS represents 2 ordinary shares.
Net income excluding share-based compensation expenses (non-GAAP) was RMB
73.8 million (US$ 9.6 million) in the first quarter of 2007, representing a
181.7% increase from the first quarter of 2006.
As of March 31, 2007, the Company had cash of RMB 102.3 million (US$ 13.3
million). Outstanding short-term loan was RMB 288.0 million (US$ 37.3
million). In April 2007, the Company received net proceeds of approximately
US$162 million from its initial public offering on the New York Stock
Exchange.
Financial Outlook
Based on current operating and market conditions, Simcere's targeted total
revenues for the full year 2007 are expected to be between RMB1.33 billion
(US$172.2 million) and RMB1.4 billion (US$181.3 million) and Simcere's target
annual net income for the full year 2007 is expected to be between RMB270
million (US$35.0 million) and RMB280 million (US$36.3 million).
Non-GAAP Disclosure
In addition to the unaudited consolidated financial information presented
in accordance with US GAAP, Simcere's management uses a non-GAAP measure of
net income excluding non-cash share-based compensation. Simcere's management
believes excluding the share-based compensation expenses from non-GAAP
financial measures is useful for the investors' understanding of overall
current financial performance. Nevertheless, the limitation of using non-GAAP
financial measures excluding share-based compensation expenses is that share-
based compensation expenses have been and will continue to be a significant
recurring expense in the Company's business.
The presentation of the non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for the financial information
prepared and presented in accordance with US GAAP. For more information on
these non-GAAP financial measures, please see the tables captioned
"Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures" set forth at the end of this release, which shall be
read in conjunction with the preceding financial information presented in
accordance with US GAAP.
Safe Harbor Statement
This press release contains forward-looking statements. These statements
constitute "forward-looking" statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and as defined in the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as "anticipate," "believe," "estimate,"
"expect," "forecast," "intend," "may," "plan," "project," "predict," "should"
and "will" and similar expressions. In particular, the projected full year
2007 data regarding the total net revenues and net income are forward-looking
statements. These forward looking statements are based upon management's
current views and expectations with respect to future events and are not a
guarantee of future performance. Furthermore, these statements are, by their
nature, subject to a number of risks and uncertainties that could cause actual
performance and results to differ materially from those discussed in the
forward-looking statements as a result of a number of factors. Further
information regarding these and other risks is included in Simcere's filing
with the U.S. Securities and Exchange Commission at www.sec.gov. Simcere does
not undertake any obligation to update any forward-looking statement, except
as required under applicable law.
Conference Call
Simcere Pharmaceutical Group will host a conference call to discuss the
first quarter 2007 earnings at 8 pm Eastern Time, May 15, 2007 (Beijing/Hong
Kong time: May 16, 2007 at 8 am). The management team will be on the call to
discuss quarterly results and highlights and to answer questions.
Dial-in details for the earnings conference call are as follows:
US toll free dial in number: 866-713-8310
US toll dial in number: 617-597-5308
HK toll dial in number: +852-3002-1672
Pass code for all regions: Simcere
Following the earnings conference call, an archive of the call will be
available by dialing:
US toll free dial in number: 888-286-8010
International dial in number: 617-801-6888
Pass code: 73035007
The conference call will also be available on web site
http://www.simcere.com for seven days.
About Simcere Pharmaceutical Group
Simcere Pharmaceutical Group is a leading manufacturer and supplier of
branded generic pharmaceuticals in the rapidly growing China market. In
recent years, Simcere Pharmaceutical Group has focused its strategy on the
development of first-to-market generic and innovative pharmaceuticals, and has
introduced a first-to-market generic anti-stroke medication under the brand
name Bicun and an innovative anti-cancer medication under the brand name Endu.
Simcere Pharmaceutical Group currently manufactures and sells 35
pharmaceutical products including antibiotics, anti-cancer medication and
anti-stroke medication and is the exclusive distributor of three additional
pharmaceuticals that are marketed under its brand names. Simcere concentrates
its research and development efforts on the treatment of diseases with high
incidence and/or mortality rates and for which there is a clear demand for
more effective pharmacotherapy such as cancer, strokes, osteoporosis and
infectious diseases. For more information about Simcere Pharmaceutical Group,
please visit http://www.simcere.com .
SIMCERE PHARMACEUTICAL GROUP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, Amounts expressed IN THOUSANDS, EXCEPT PER SHARE AND PER ADS
DATA)
Period ended March 31,
2006 2007 2007
RMB RMB USD
Product revenues 237,076 312,272 40,433
Cost of materials and
production (50,339) (57,267) (7,415)
Gross profit 186,737 255,005 33,018
Operating expenses:
Research and development
expenses (11,499) (13,746) (1,780)
Sales, marketing and
distribution expenses (108,279) (136,303) (17,649)
General and administrative
expenses (26,982) (30,930) (4,005)
Income from operations 39,977 74,026 9,584
Interest income 212 486 63
Interest expense (2,440) (4,003) (518)
Income before income tax
expense and minority interests 37,749 70,509 9,129
Income tax expense (14,631) (1,476) (191)
Income before minority
interests 23,118 69,033 8,938
Minority interests 3,078 (2,088) (270)
Net income 26,196 66,945 8,668
Earnings per share:
Basic 0.37 0.67 0.09
Diluted 0.37 0.65 0.08
Earnings per ADS:
Basic 0.74 1.34 0.17
Diluted 0.74 1.30 0.17
SIMCERE PHARMACEUTICAL GROUP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, Amounts expressed IN THOUSANDS)
Dec 31, Mar 31, Mar 31,
2006 2007 2007
RMB RMB USD
Assets
Current assets
Cash 106,027 102,334 13,250
Pledged bank deposits 20,787 15,100 1,955
Accounts receivable, net of
allowance for doubtful
accounts 61,723 99,723 12,912
Bills receivable 101,058 109,756 14,211
Inventories 39,483 34,847 4,512
Prepaid expenses and other
current assets 79,192 86,759 11,234
Amounts due from related parties 434 432 56
Deferred income taxes 2,725 2,247 291
Total current assets 411,429 451,198 58,421
Property, plant and equipment,
less accumulated depreciation 267,054 274,450 35,536
Land use rights 82,522 81,546 10,559
Deposits for purchase of
property, plant and equipment 4,056 2,761 357
Intangible assets, net 163,148 160,142 20,735
Goodwill 100,634 98,545 12,760
Deferred income taxes 5,704 5,915 766
Total assets 1,034,547 1,074,557 139,134
Liabilities
Current liabilities
Short-term bank loans and
borrowings 333,000 288,000 37,290
Accounts and bills payable 20,089 12,356 1,600
Accrued payroll and employee
benefits 23,766 20,724 2,683
Other payables and accrued
liabilities 169,874 191,091 24,743
Amounts due to related parties 1,352 1,035 134
Income taxes payable 20,092 21,942 2,841
Total current liabilities 568,173 535,148 69,291
Deferred income taxes 23,634 22,877 2,962
Total liabilities 591,807 558,025 72,253
Minority interests - - -
Shareholders' equity
Contributed capital 7,909 7,909 1,024
Additional paid-in capital 265,964 272,811 35,324
Retained earnings 168,867 235,812 30,533
Total shareholders' equity 442,740 516,532 66,881
Commitments and contingencies
Total liabilities, minority
interests and shareholders'
equity 1,034,547 1,074,557 139,134
Note: The conversions of Renminbi (RMB) into United States dollars (USD)
as at the reporting dates are based on the noon buying rate of USD1.00 = RMB
7.7232 on March 31, 2007, The City of New York for cable transfers of Renminbi
as certified for customs purposes by the Federal Reserve. No representation is
intended to imply that the RMB amounts could have been, or could be,
converted, realized or settled into U.S. dollars at that rate on the reporting
dates.
RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO
THE NEAREST COMPARABLE GAAP MEASURES (*)
(UNAUDITED, EXPRESSED IN RMB THOUSANDS)
Three months ended March Three months ended March
31, 2006 31, 2007
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
Result Result Result Result
Income from
operations 39,977 39,977 74,026 6,847 80,873
Net income 26,196 26,196 66,945 6,847 73,792
(*) The adjustment is for share-based compensation expenses.
Non-GAAP Disclosure
In addition to the unaudited consolidated financial information presented
in accordance with US GAAP, Simcere's management uses a non-GAAP measure of
net income excluding non-cash share-based compensation. Simcere's management
believes excluding the share-based compensation expenses from non-GAAP
financial measures is useful for the investors' understanding of overall
current financial performance. Nevertheless, the limitation of using non-GAAP
financial measures excluding share-based compensation expenses is that share-
based compensation expenses have been and will continue to be a significant
recurring expense in the Company's business.
The presentation of the non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for the financial information
prepared and presented in accordance with US GAAP. For more information on
these non-GAAP financial measures, please see the tables captioned
"Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures" set forth at the end of this release, which shall be
read in conjunction with the preceding financial information presented in
accordance with US GAAP.