BEIJING, May 21 /Xinhua-PRNewswire-FirstCall/ -- Lotus Pharmaceuticals, Inc. (“Lotus” or the “Company”), a pharmaceutical company in the People’s Republic of China (“PRC”), today announced financial results for the first quarter ended March 31, 2008.
“We are pleased with our results in the first quarter of 2008. In one of our seasonally slowest quarters of the year, we achieved revenue growth in excess of 41.3% as well as a improvement in gross margin and net income. We focused our sales efforts on our top selling products, Brimonidine Tartrate Eyes Drops and VALSARTAN Capsules, and continued to distribute higher-margin, third party pharmaceutical products,” said Mr. Zhongyi Liu, Chairman and CEO of Lotus Pharmaceuticals, Inc.
First Quarter 2008 Results
Lotus Pharmaceutical’s total revenue in the first quarter was $11.7 million, an increase of 41.3% on year-over-year basis. Wholesale revenue increased 93.5% year-over-year to $9.8 million, or 83% of total revenue, and was due to strong sales of Brimonidine Tartrate Eyes Drops for the treatment of glaucoma and the Company’s hypertension drug, VALSARTAN Capsules. Revenues from the distribution of third party manufactured pharmaceutical products also increased. Other revenues decreased 54.2% year-over-year to $1.3 million, or 11% of revenue in the first quarter of 2008, due primarily to fewer contracts for third party manufacturing services and a reduction in the amount of space at the Company’s retail stores that was leased to third parties. Retail revenue was $0.7 million in the first quarter of 2008, up 36.4% year-over-year, due to the Company’s continuous efforts to include more variety and better quality products at its retail stores.
Gross profit in the first quarter of 2008 was $3.9 million, an increase of 50.0% on year-over-year basis. Gross margin was 33.7%, up from 31.7% in the first quarter of 2007, primarily due better purchase pricing management.
Operating expenses in the first quarter of 2008 were $2.5 million, up 69.2% from $1.5 million in the first quarter of 2007. This increase was primarily the result of a 100.9% increase in selling expenses to $1.1 million from $0.6 million in the first quarter of 2007. The increase in selling expenses was due to higher incentive commissions for sales representatives and travel-related expenses associated with the Company’s sales growth. Research and development expenses were $0.7 million in the first quarter of 2008, compared with $0.1 in the first quarter of 2007. General and administrative expenses were $0.6 million, down from $0.8 million a year ago. Operating expenses were 21.0% of total revenue in the first quarter of 2008, up from 17.5% in the first quarter of 2007.
Operating income was $1.5 million, up 26.3% from $1.2 million in the first quarter of 2007.
Net income for the first quarter of 2008 was $1.0 million, or $0.02 per diluted share, compared to $0.8 million, or $0.02 per fully diluted share, in the first quarter of 2007. Adjusting net income for non-cash financing costs associated with its convertible notes and convertible preferred stock, adjusted net income was $1.4 million, or $0.03 per fully diluted share, in the first quarter of 2008, up 33.4% from adjusted net income of $1.1 million, or $0.02 per fully diluted share, in the first quarter of 2007.
Financial Condition
As of March 31, 2008, Lotus had $3.6 million in cash and equivalents, approximately $32.2 million in working capital, notes payable of $4.9 million and $3.1 million in convertible mandatorily redeemable preferred stock (net of discount of $1.9 million). Stockholders’ equity at March 31, 2008 was $31.9 million, up 19.6% from $26.6 million at December 31, 2007.
In February 2008, the Company received net proceeds from the sale of shares of its Series A Convertible Mandatorily Redeemable Preferred Stock of approximately $4.6 million. The Company used approximately $2.6 million to repay in full all of its outstanding obligations under its 14% secured convertible notes, the remainder was used for working capital purposes.
Recent Event
In May 2008, Lotus signed the technology transfer agreement for Laevo- Bambutero with Dongguan Kaifa Biomedicine, Inc. (“Dongguan Kaifa”). Under the terms of agreement, Lotus obtained the patent and the exclusive production rights for Laevo-Bambutero in China in exchange for a cash payment cash payment of RMB 48 million and a 3% royalty on products sales. The Company has already paid RMB 20 million. The Company intends to market Laevo-Bambutero as a better alternative to Bambutero for the treatment of asthma, since it is uses an integrated method of composition and has fewer side effects. Lotus plans to launch the drug by 2012, pending on the approval from SFDA.
2008 Outlook
“We began 2008 on strong footing and expect continued growth throughout the year. In the coming months, we plan to continue advertising and promoting our best selling proprietary products. We recently obtained the patent and exclusive production rights to a promising new asthma treatment, Laevo- Bambutero, and plan to launch the drug in 2012, pending approval from the SFDA. We are excited about this new drug, as it has a large addressable patient population and few side effects,” said Mr. Liu. “We will continue to seek opportunities to further diversify our product pipeline and improve profitability in the long term. We are also actively pursuing strategic acquisitions to improve our position in the growing pharmaceutical market in China.”
Conference Call - Please update once timing of the call is determined.
The Company will conduct a conference call at 10:00 a.m. Eastern Time on Tuesday, May 27, 2008 to discuss the first quarter of 2008 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-481-7939. International callers should dial 617-847-8707. The passcode for this call is 45954238. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Tuesday, May 27, 2008 at 12:00 p.m. Eastern Time. To access the replay, dial 888-286-8010, international callers dial 617-801-6888, passcode 82020022.
Use of Non-GAAP Financial Information
GAAP results for the three month periods ended March 31, 2008 and March 31, 2007 include certain non-cash debt financing expenses related to the Company’s convertible notes and convertible mandatorily redeemable preferred stock. To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, which are adjusted net income and adjusted earnings per share, excluding the impact of these items in this release. The Company’s management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company’s historical performance. A reconciliation of adjustments to GAAP results appears below. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
About Lotus Pharmaceuticals, Inc.
Lotus Pharmaceuticals, Inc. (“Lotus”) controls and operates Liangfang Pharmaceutical, Ltd. (“Liangfang”) and Enzhe Jiashi Pharmaceutical, Ltd. (“En zhe”), two Chinese pharmaceutical companies located in Beijing (together “Lotus East”). Lotus East is a comprehensive enterprise, which deals in an integration of the production, trade, sales and marketing of pharmaceuticals. The Company possesses some of the most advanced pharmaceutical-production equipment used in China, workshops authenticated by the National GMP, a suite of various medicines produced by Lotus East, and a number of high-tech personnel. Lotus East has business and office facilities of 2,000 square meters, warehouse of 1,000 square meters and operates ten retail pharmacies in the Beijing area. Lotus East performs scientific research on new medicines, and the production, wholesale and retail sale of medicines through 10 retail pharmacy location through Beijing. For more information, visit http://www.LotusEast.com.
Safe Harbor Statement
Certain statements set forth in this press release constitute “forward- looking statements”. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words “estimate,” “project,” “intend,” “forecast,” “anticipate,” “plan,” “planning,” “expect,” “believe,” “will likely,” “should,” “could,” “would,” “may” or words or expressions of similar meaning. 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. The potential risks and uncertainties include, among others, the Company’s limited operating history, the limited financial resources, domestic or global economic conditions -- especially those relating to China, activities of competitors and the presence of new or additional competition, and changes in Federal or State laws, restrictions and regulations on doing business in a foreign country, in particular China, and conditions of equity markets. More information about the potential factors that could affect the Company’s business and financial results is included in the Company’s filings, available via the United States Securities and Exchange Commission.
CONTACT: Mr. Adam Wasserman, CFO of Lotus Pharmaceuticals, Inc. at +1-
877-801-0344, or info@LotusEast.com; or Mr. Crocker Coulson, President of
CCG Elite Investor Relations Inc. at +1-646-213-1915 (New York), or
crocker.coulson@ccgir.com, for Lotus Pharmaceuticals, Inc.
Web site: http://www.LotusEast.com/
