China Pharma Holdings, Inc. Reports First Quarter 2012 Financial Results
Published: May 15, 2012
HAIKOU CITY, China, May 15, 2012 /PRNewswire-Asia-FirstCall/ -- China Pharma Holdings, Inc. (NYSE AMEX: CPHI) ("China Pharma" or the "Company"), a specialty pharmaceuticals company in China, today announced financial results for the quarter ended March 31, 2012.
First Quarter 2012 Highlights
- Revenue was $16.1 million, compared to $18.1 million in the prior year period;
- Gross profit was $5.3 million, compared to $6.9 million in the prior year period;
- Operating income was $3.4 million, compared to $5.3 million in the prior year period;
- Net income was $2.8 million, or $0.06 per basic and diluted share, compared to $5.3 million in the prior year period, or $0.12 per basic and diluted share;
"This year we expect to see many new Healthcare Reform policy implementations, most of which are centered around the theme of price control. At the same time we are seeing cost of materials (such as raw chemical materials, APIs, packaging materials as well as logistic costs) rising fast. The Chinese pharmaceutical industry is therefore facing tremendous operating pressure due to falling top line and rising cost of goods sold." Ms. Zhilin Li, China Pharma's Chairman and CEO continued, "With respect to the first quarter, new government pricing policies as well as the general uncertain atmosphere of the industry negatively impacted our short-term results. But we expect gross margin and revenue to benefit from new product launches in the months and quarters ahead."
First Quarter of FY2012 Results of Operations
Revenues for the quarter ended March 31, 2012 were $16.1 million, a decrease of $2.0 million, or 11% from $18.1 million for the quarter ended March 31, 2011. Decline in our total revenue was due to the sales decrease in our four major product categories.
Most of the decline in our total revenue was from our "Other's" category where sales fell by 37% to $2.0 million from $3.1 million for the same period last year. Sales in the Anti-Viro Infection & Respiratory category fell by 4% to $6.8 million from $7.1 million in the prior year period. The "Digestive" category sales revenues edged lower by 2% to $2.5 million from $2.6 million in the same period prior year. Sales of CNS Cerebral & Cardio Vascular products fell by 11% to $4.8 million from $5.4 million in the first quarter of 2011.
Gross profit for the three months ended March 31, 2012 was $5.30 million, which was approximately 23% lower compared to $6.87 million for the quarter ended March 31, 2011. Our gross margin for the first quarter of 2012 was 33%, compared to 38% in the corresponding quarter of 2011. We are seeing pricing pressure on many of our products, particularly digestive drugs, although the pressure is not uniform across product lines. Pricing pressure has become more evident over the past few quarters as the Chinese government healthcare reform is having a stronger impact on all pharmaceutical products, especially the products listed on National Essential Drug List. We expect current challenging pricing environment to persist for some time.
In terms of our gross margins by major categories, CNS Cerebral & Cardio Vascular category margin was 39.4%, lower compared to the first quarter 2011 gross margin of 45.3%. Gross margin for our Anti-Viro/Infection & Respiratory category decreased to 25.4% from 27.5% in the period one year ago. Gross margin for our Digestive Diseases category decreased to 35.7% from 48.4%, in the period one year ago. Gross margin for our Other category fell to 40.0% from 44.9% a year ago.
Selling, general and administrative expenses in the first quarter of 2012 were $1.57 million, compared to $1.52 million, in the same period of 2011. The decrease in general and administrative expenses along with the revenue did not completely offset the increasing selling expenses mainly due to higher labor cost.
For the quarter ended March 31, 2012, the Company's bad debt expense was $320,098, compared to $9,248 in the same period of 2011. The increase was mainly due to the higher percentage of the older accounts receivables.
Operating income was $3.4 million in the first quarter of 2012, down 36% from $5.3 million in the first quarter of 2011. Operating income was lower mainly due to lower revenue and lower gross margins and higher operating expenses in the current period compared to the corresponding quarter one year ago.
For the quarter ended March 31, 2012, the Company paid income tax at a rate of approximately 15%. Income tax expense for the first quarter of 2012 was $0.53 million, compared to $0.85 million for the same period last year. The Company obtained "National High-Tech Enterprise" status from the PRC government in the fourth quarter of 2010. With this designation, the Company is entitled to a preferential tax rate of 15% for three years from 2011 to 2013, which is notably lower than the statutory income tax rate of 25%.
Net income for the first quarter of 2012 was $2.8 million, or $0.06 per basic and diluted share, compared to $5.1 million, or $0.12 per basic and diluted share, in the first quarter of 2011. The decrease of net income from the period a year ago is mainly due to the decrease in sales revenue, falling gross margins and higher operating expenses. Our net income for the first quarter of 2011 also included a positive effect of $0.68 million of derivative gains.
As of March 31, 2012, the Company had cash and cash equivalents of $3.3 million compared to $4.1 million as of December 31, 2011.
Working capital increased to $99.9 million at March 31, 2012 from $96.8 million at December 31, 2011. The current ratio decreased to 6.8 times at March 31, 2012 from 8.0 times at December 31, 2011.
Accounts receivable balance rose to $73.5 million at the end of the first quarter of 2012 from $69.7 million at the end of 2011. The Company's management team continues to be sharply focused on improving accounts receivable collection and expects to make progress in the quarters to come.
For the three months ended March 31, 2012, cash flow from operating activities was $0.12 million, as compared to $1.39 million in the period a year ago.
As of March 31, 2012, China Pharma had various pipeline drugs in different stages of active development. Some of these are highlighted below:
- The Company originally submitted application for production approval of Candesartan, a front-line drug therapy developed for the treatment of hypertension, in 2010. The Company received request for additional procedures in the fourth quarter of 2011 and has since completed all newly requested procedures. We now expect SFDA to give us the final production approval by mid-year 2012.
- The Company completed clinical trials of Rosuvastatin, a generic form of Crestor, and is in the process of production approval process.
- The Company completed Phase I clinical trials of its novel cephalosporin-based combination antibiotic in September 2010. We are currently conducting Phase II clinical trials for this drug.
- The Company is developing a medicine for the treatment of coronary heart disease. This product comes with a patented TCM formula and we are currently conducting Phase III clinical trials for this drug. We anticipate the completion of the clinical work for this product by year end 2012.
The Company will hold a conference call at 8:30 am ET on May 15, 2012 to discuss first quarter 2012 results. Listeners may access the call by dialing 1-866-519-4004 or 65-672-393-81 for international callers, Conference ID # 78450563. A webcast will also be available through CPHI's website at http://www.chinapharmaholdings.com. A replay of the call will be accessible through May 22, 2012 by dialing 1-866-214-5335 or 61-282-355-000 for international callers, Conference ID # 78450563.
About China Pharma Holdings, Inc.
China Pharma Holdings, Inc. is a rapidly growing specialty pharmaceutical company that develops, manufactures and markets a diversified portfolio of products focused on conditions with a high incidence and high mortality rates in China, including cardiovascular, CNS, infectious, and digestive diseases. The Company's cost-effective, high-margin business model is driven by market demand and supported by eight scalable GMP-certified product lines covering the major dosage forms. In addition, the Company has a broad and expanding nationwide distribution network across all major cities and provinces in China. The Company's wholly-owned subsidiary, Hainan Helpson Medical & Biotechnology Co., Ltd., is located in Haikou City, Hainan Province. For more information about China Pharma Holdings, Inc., please visit http://www.chinapharmaholdings.com. The Company routinely posts updated information on its website.