Net Income Increased 67.5% Year Over Year
NANJING, China, May 6 /Xinhua-PRNewswire/ -- Simcere Pharmaceutical Group (NYSE: SCR), a leading manufacturer and supplier of branded generic pharmaceuticals and manufacturer of the patented anti-cancer biotech product Endu in China, today reported unaudited financial results for the quarter ended March 31, 2008.
Highlights
-- Total revenue increased to RMB394.6 million (US$56.3 million) for the
first quarter of 2008 from RMB312.3 million in the first quarter of
2007, representing a 26.4% year over year growth;
-- Net income increased to RMB112.1 million (US$16.0 million) for the
first quarter of 2008 from RMB66.9 million in the first quarter of 2007,
representing a 67.5% year over year growth;
-- Basic and diluted earnings per ADS were RMB1.79 (US$0.26) and RMB1.76
(US$0.25), respectively. Each ADS represents two ordinary shares; and
-- Gross margin increased to 83.2% for the first quarter of 2008 compared
to 81.7% in the first quarter of 2007.
-- On April 18, 2008, the Company entered into a definitive agreement to
acquire a 70.0% equity interest in Wuhu Zhong Ren Pharmaceutical Co.
Ltd.; Simcere’s third acquisition post IPO.
Mr. Jinsheng Ren, Chairman and CEO of Simcere Pharmaceutical Group, commented, “Simcere has achieved steady growth in the past quarter, with sales of our anti-cancer product Endu and stroke management products Bicun and Yidasheng continuing to improve year on year. The revenue from these three drugs contributed about 55% of our total product revenue in the first quarter, as our strategic emphasis shifts from branded generics to first-to-market branded generics and innovative drugs. In addition, our continuing efforts in merger and acquisition initiatives have led us to our third post-IPO acquisition: the acquisition of 70.0% equity interest in Wuhu Zhong Ren Pharmaceutical Co. Ltd., a Chinese drug manufacturer specializing in the production of sustained release anti-tumor implants. We aim to find more exciting acquisition opportunities like this to expand our growing product portfolio.”
2008 First Quarter Financial Results
Total revenue for the first quarter of 2008 was RMB394.6 million (US$56.3 million), representing a growth of 26.4% from RMB312.3 million for the same period in 2007.
Revenue from Endu, the Company’s patented anti-cancer pharmaceutical, totaled RMB63.8 million (US$9.1 million), representing 16.2% of the Company’s product revenue for the quarter and a growth of 63.6% from RMB39.0 million for the same period in 2007.
Revenue from Edavarone injection products, Bicun and Yidasheng, the Company’s first-to-market stroke management product, totaled RMB152.0 million (US$21.7 million) in the first quarter of 2008, representing 38.7% of the Company’s product revenue and a growth of 89.1% from RMB80.4 million for the same period in 2007.
Revenue from other branded generic products for the first quarter of 2008 totaled RMB177.1 million (US$25.3 million), compared withRMB192.9 million for the same period in 2007.
Gross margin for the first quarter of 2008 increased to 83.2%, as compared to 81.7% in the comparable prior year period. The increase was primarily due to the optimization of the product portfolio, as increased sales of first-to-market branded generic Bicun and innovative drug Endu, both have higher gross margin compared to the Company’s other products.
Research and development expenses for the first quarter of 2008 totaled RMB17.8 million (US$2.5 million), an increase of 29.3% from RMB13.7 million for the corresponding period a year ago. The increase in research and development expenses was primarily due to the ongoing Phase IV clinical study for Endu, continuing expansion of the Company’s research and development department and other ongoing research projects.
Sales, marketing and distribution expenses for the first quarter of 2008 were RMB164.5 million (US$23.5 million), an increase of 20.7% from RMB136.3 million for the corresponding period a year ago. As a percentage of total revenue, sales, marketing and distribution expenses were 41.7% compared to 43.6% for the same period in 2007. The decrease was partially due to fewer marketing activities during January and February 2008 when many parts of China were severely hit by the snow storm.
General and administrative expenses were RMB47.0 million (US$6.7 million) for the first quarter of 2008, representing an increase of 52.0% from RMB30.9 million for the first quarter of 2007. The increase was attributable to increases in professional fees and other administrative expenses since listing in April 2007 and the expenses incurred in the newly consolidated business entities.
Share-based compensation expenses, which were allocated to research and development expenses, sales and marketing expenses, and general and administrative expenses, based on the nature of the work the Company’s employees were assigned to perform, totaled RMB7.0 million (US$1.0 million) for the first quarter of 2008.
Operating income was RMB99.2 million (US$14.1 million) for the first quarter of 2008, representing an increase of 34.0% as compared to RMB74.0 million for the corresponding period of 2007.
Income tax expense for the first quarter of 2008 totaled RMB16.8 million (US$2.4 million) compared to RMB1.5 million for the corresponding period of 2007. The increase was primarily due to the expiration of tax holidays of two subsidiaries.
Net income was RMB112.1 million (US$16.0 million) for the first quarter of 2008, compared to RMB66.9 million in the corresponding period a year ago and representing growth of 67.5%. The Company’s net margin was 28.4% for the first quarter of 2008 compared to 21.4% for the first quarter of 2007.
The basic earnings per American Depository Share (ADS) for the first quarter of 2008 increased to RMB1.79 (US$0.26) and the diluted earnings per ADS increased to RMB1.76 (US$0.25), compared to basic earnings per ADS of RMB1.34 and diluted earnings per ADS of RMB1.30 for the corresponding period a year ago. Each ADS represents two ordinary shares.
As of March 31, 2008, the Company had cash and cash equivalents (including pledged bank deposits), and short-term investments of RMB950.4 million (US$135.5 million) compared to RMB968.3 million as of December 31, 2007.
On April 18, 2008, the Company entered into a definitive agreement to acquire a 70% equity interest in Wuhu Zhong Ren Pharmaceutical Co. Ltd. for RMB64.8 million (US$9.2 million) in cash. The Company believes that this transaction, which expands its first-to-market product pipeline in oncology, reinforces the Company’s previously announced strategy of focusing on first-to-market brand generics and innovative drugs.
Financial Outlook
Based on current operating and market conditions, Simcere maintains its target total revenue for the full year 2008 between RMB2.0 billion and RMB2.1 billion and target annual net income for the full year 2008 between RMB390.0 million and RMB400.0 million.
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 quotations from management in this press release contain 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 http://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 2008 earnings on Tuesday, May 6, at 8 a.m. Eastern Time (Tuesday, May 6 at 8 p.m., Beijing/Hong Kong time). The management team will be on the call to discuss quarterly results and highlights and to answer questions.
To access the conference call, please dial:
United States toll-free dial-in number: +1 866 510 0712
United States dial-in number: +1 617 597 5380
China toll-free dial-in number: +86 10 800 130 0399
Hong Kong dial-in number: +852 3002 1672
Please ask to be connected to Simcere’s first quarter 2008 Earnings Call and provide the following passcode: 95590725. Simcere also will broadcast a live audio webcast of the conference call. The broadcast will be available by visiting the “Investor Relations” section of the Company’s Web site at http://www.simcere.com .
Following the earnings conference call, an archive of the call will be available by dialing:
United States toll-free dial-in number: +1 888 286 8010
International dial-in number: +1 617 801 6888
The passcode for replay participants is: 67719578. The telephone replay also will be archived on the “Investor Relations” section of the company’s Web site at http://www.simcere.com for seven days following the earnings announcement.
About Simcere Pharmaceutical Group
Simcere Pharmaceutical Group (NYSE:SCR, Simcere) is a leading manufacturer and supplier of branded generic pharmaceuticals and manufacturer of the patented anti-cancer biotech product Endu in the rapidly growing China market. In recent years, Simcere has been focusing its strategy on the development of first-to-market generic and innovative pharmaceuticals, and has introduced a first-to-market generic stroke management medication under the brand name Bicun and an innovative anti-cancer medication under the brand name Endu. Simcere currently manufactures and sells more than 50 pharmaceutical products including antibiotics, anti-cancer medication and stroke management 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 and currently has more than 12 pipeline products. For more information about Simcere Pharmaceutical Group, please visit http://www.simcere.com .
Simcere Pharmaceutical Group
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Amounts expressed IN THOUSANDS, EXCEPT PER SHARE AND PER ADS DATA)
Three months ended March 31
2007 2008 2008
RMB RMB USD
Product revenue 312,272 392,928 56,037
Other revenue -- 1,714 244
Total revenue 312,272 394,642 56,281
Cost of materials and production (57,267) (66,120) (9,430)
Gross profit 255,005 328,522 46,851
Operating expenses:
Research and development expenses (13,746) (17,773) (2,535)
Sales, marketing and distribution
expenses (136,303) (164,518) (23,461)
General and administrative
expenses (30,930) (47,027) (6,707)
Income from operations 74,026 99,204 14,148
Interest income 486 10,407 1,484
Interest expense (4,003) (482) (69)
Foreign currency exchange gains -- 26,554 3,787
Earnings before income taxes
and minority interests 70,509 135,683 19,350
Income tax expense (1,476) (16,782) (2,393)
Income before minority interests 69,033 118,901 16,957
Minority interests (2,088) (6,784) (968)
Net income 66,945 112,117 15,989
Earnings per share:
Basic 0.67 0.90 0.13
Diluted 0.65 0.88 0.13
Earnings per ADS:
Basic 1.34 1.79 0.26
Diluted 1.30 1.76 0.25
Simcere Pharmaceutical Group
UNAUDITED CONSOLIDATED CONDENSED Balance Sheets
(Amounts expressed IN THOUSANDS)
December 31, March 31, March 31,
2007 2008 2008
RMB RMB USD
Assets
Current assets
Cash and cash equivalents (including
pledged bank deposits) 498,262 220,426 31,435
Short term investments 470,000 730,000 104,107
Accounts and bills receivables, net
of allowance for doubtful accounts 488,374 605,031 86,285
Inventories 65,241 65,591 9,354
Other current assets 35,276 43,678 6,229
Total current assets 1,557,153 1,664,726 237,410
Property, plant and equipment, less
accumulated depreciation 374,058 383,663 54,715
Land use rights 116,386 116,061 16,552
Intangible assets, net 251,221 245,314 34,985
Goodwill 161,496 161,496 23,031
Other assets 11,894 11,662 1,664
Total assets 2,472,208 2,582,922 368,357
Liabilities
Current liabilities
Short-term bank loans and borrowings 29,000 19,000 2,710
Accounts and bills payable 23,711 24,841 3,543
Other payables and accrued
liabilities 285,411 284,716 40,603
Income taxes payable 24,443 26,271 3,747
Total current liabilities 362,565 354,828 50,603
Other long term liabilities -- 19,928 2,842
Long term loan 52,000 52,000 7,416
Deferred income taxes 61,690 60,936 8,690
Total liabilities 476,255 487,692 69,551
Minority interests 12,137 18,921 2,698
Shareholders’ equity
Contributed capital 9,840 9,840 1,403
Additional paid-in capital 1,550,697 1,557,897 222,176
Accumulated other comprehensive loss (46,849) (73,673) (10,507)
Retained earnings 470,128 582,245 83,036
Total shareholders’ equity 1,983,816 2,076,309 296,108
Commitments and contingencies
Total liabilities, minority interests
and shareholders’ equity 2,472,208 2,582,922 368,357
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 = RMB7.0120 on March 31, 2008 in 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.