HAIKOU, China, March 31, 2016 /PRNewswire/ -- China Pharma Holdings, Inc. (NYSE MKT: CPHI) ("China Pharma," the "Company" or "We"), an NYSE MKT listed corporation with its fully-integrated specialty pharmaceuticals subsidiary based in China, today announced financial results for the year ended December 31, 2015.
Full Year Highlights
- Revenue decreased 8.1% to $20.4 million in fiscal year 2015 from $22.1 million in fiscal year 2014;
- Gross margin was 7.2% in fiscal year 2015, compared to 12.1% in fiscal 2014. Without the effect of inventory obsolescence, management estimates that our gross profit would have been approximately 22.5% in fiscal year 2015 and 22.2% in fiscal year 2014;
- Loss from operations was $14.3 million in fiscal year 2015 compared to $38.8 million in 2014, a decrease of $24.5 million;
- Net loss was $15.4 million in fiscal year 2015 compared to $39.6 million in 2014. Loss per common share was $(0.35) per basic and diluted share in fiscal 2015 compared with $(0.91) per basic and diluted share in fiscal year 2014.
"China's healthcare reform was deepened in 2015. Under the industrial reform and modification background guided by the government policies, we actively completed the new GMP upgrading for the majority of our current production facility, and aggressively promoted our sales to regain our original market shares. Due to the fact that we only received new GMP certificate for the injectable production lines at our new manufacturing facility in November 2014, we missed drug biddings in several provinces prior to November 2014. Those missed biddings negatively impacted our market shares previously secured in those provinces, and dragged our sales in 2015." said Ms. Zhilin Li, China Pharma's Chairman and CEO. Ms Li continued, " Nevertheless, we continued concentrating on enhancing our fundamentals. In January and December 2015, we completed the upgrading and received new GMP certificates for the tablet and capsule production lines, and cephalosporin production lines at our old factories, respectively. The upgrading of these oral solution production lines was completed before the deadline, which positioned us to better meet market demand. Although there was no immediate reversal of sales trends in 2015 due to the special characteristics of the pharmaceutical industry, we strongly believe that our current operations and financial position will allow us to secure the foundation for steady business growth in the future."
Full Year Results
Revenues for the year ended December 31, 2015 were $20.4 million, a decrease of 8.1% from revenues of $22.1 million for the year ended December 31, 2014. This decrease was primarily due to the missed biddings in certain provinces back in 2014 despite our efforts in promoting sales to regain our market shares during 2015.
We had decreases in the sales estimates between the time when raw materials were purchased and the time when the sales performance is realized for certain products. We assessed the fair value of our raw material and determined that certain inventory was slow moving or obsolete. Based on the developed estimates as of December 31, 2015 and 2014, we recognized an additional inventory obsolescence expense of $3.1 million and $2.3 million for the years ended December 31, 2015 and 2014, respectively.
Gross profit for the year ended December 31, 2015 was $1.5 million, compared to $2.7 million in 2014. Our gross profit margin in 2015 was 7.2% compared to 12.1% in 2014. Without the effect of inventory obsolescence, management estimates that our gross profit would have been approximately 22.5% in 2015 and 22.2% in 2014.
Selling, general and administrative expenses in 2015 were $6.2 million, or 30.4% of sales, compared to $5.1 million, or 22.9% of sales, in 2014. The increase was mainly due to additional marketing, consulting and product promotional efforts in certain PRC provinces. For the year ended December 31, 2015, the Company's research and development expense was $1.0 million, compared to $2.8 million in 2014. The change in research and development expenses was mainly due to the costs related to testing of the new production lines in 2014. As a result, the expenses related to such activities were higher in 2014.
For the year ended December 31, 2015, the Company's bad debt expense was $10.1 million, compared to a bad debt expense of $31.4 million in 2014. In the restatement of the annual report for the year ended December 31, 2014 (the "2014 Restatement"), we reviewed our policy for bad debt allowance for accounts receivable and therefore significantly increased the bad debt expense in 2014. During 2015, we also recognized bad debt expense of $4.2 million related to advances to suppliers based on an evaluation of the realizability of the payment.
Operating loss was $14.3 million in 2015 compared to operating loss of $38.8 million in 2014. The main reason for the decrease in loss was lower bad debt expenses in 2015.
For the years ended December 31, 2015 and 2014, our income tax rate was 15%. Income tax expenses were $0.06 million and $0.08 million for the years ended December 31, 2015 and 2014, respectively. We renewed our "National High-Tech Enterprise" status from the PRC government in the third quarter of 2013. With this designation, for the years ending December 31, 2014, 2015 and 2016, we enjoy a preferential tax rate of 15% which is notably lower than the statutory income tax rate of 25%.
Net loss for the year 2015 was $15.4 million, or $(0.35) per basic and diluted share, compared to net loss of $39.6 million, or $(0.91) per basic and diluted share for the year 2014. The decrease in net loss was mainly due to the decrease in bad debt expense.
Financial Condition
As of December 31, 2015, the Company had cash and cash equivalents of $6.2 million compared to $5.3 million as of December 31, 2014. Year-over-year, working capital decreased to $12.2 million in 2015 from $27.7 million in 2014 and the current ratio was 2.0 times in 2015, decreased from 3.0 times in 2014.
Our accounts receivable balance decreased to $5.9 million as of December 31, 2015 from $13.9 million as of December 31, 2014. The decrease was mainly due to bad debt expense of $7.4 million in 2015. Our gross receivables and allowance reserve decreased due to the bad debt write-off of $21.3 million in 2015.
For the year ended December 31, 2015, cash flow from operating activities was $3.4 million, as compared to $6.2 million in 2014.
Pipeline Update
In order to support our existing products package under the unfavorable economic environment, we have remained focused on pipeline development. We have experienced delays in obtaining approval for the products in our pipeline due to revisions and enhancements in the approval criteria and processes issued by China Food and Drug Administration (the "CFDA") which result in additional supplemental materials and trials, higher cost, and longer approval time for certain applications. In March 2016, the PRC State Council issued the "Opinions on Carrying out Consistency Evaluation on Quality and Efficacy of Generic Drugs" which requires all chemical generic pipeline products to carry out Consistency Evaluation before final registration approval and therefore further prolongs the registration process for our pipeline products.
As of December 31, 2015, China Pharma had various pipeline drugs in different stages of active development. Some of these are highlighted below:
- Antibiotic Combination - We are currently in Phase II of the clinical trial, due to the higher regulatory requests for clinical works.
- Rosuvastatin - Rosuvastatin is a generic form of Crestor, a drug for the treatment of high blood cholesterol levels. Clinical trials for this generic drug were completed in the fourth quarter of 2010, and are supplementing Consistency Evaluation pursuant to the Opinions.
- Heart Disease Drug - We developed an oral solution for the treatment of coronary heart disease in our new product pipeline. This product comes with a patented Traditional Chinese Medicine (TCM) formula. We have completed Phase III clinical trials and are currently collecting and summarizing trial data.
- Alzheimer's disease drug - We developed a drug for the treatment of Alzheimer's disease and are supplementing Consistency Evaluation pursuant to the Opinions.
- Digestive Diseases drug - We developed two drugs for the treatment of digestive diseases and has applied to CFDA for Production Approval, currently waiting for CFDA Technical Review.
- Antibiotic for Kids - We developed an oral solution antibiotic for the kids and are supplementing Consistency Evaluation pursuant to the Opinions.
Conference Call
The Company will hold a conference call at 8:30 am ET on March 31, 2016 to discuss the results of fiscal year 2015. Listeners may access the call by dialing 1-866-519-4004 or 65-671-350-90 for international callers, Conference ID # 74383247. A replay of the call will be accessible through April 7, 2016 by dialing 1-855-452-5696 or 61-281-990-299 for international callers, Conference ID # 74383247.
About China Pharma Holdings, Inc.
China Pharma Holdings, Inc. is a 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.
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