BEIJING, April 17 /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 fourth quarter and fiscal year ended December 31, 2007.
''This was a very successful year for Lotus Pharmaceuticals, both in terms of financial performance and the execution of our strategic initiatives. We achieved significant growth in revenues, due in large part to our strategy of penetrating the direct sales channels into agencies and hospitals and enhancing our production capacity. We also focused on our best selling products, including our hypertension medication VALSARTAN Capsules, and began distributing higher-margin, third-party pharmaceutical products through our existing network,'' said Mr. Zhongyi Liu, Chairman and CEO of Lotus Pharmaceuticals, Inc. ''We will continue to maintain this strategy in the year ahead and plan to explore new markets.''
Fourth Quarter 2007 Results
Lotus Pharmaceutical's total revenue in the fourth quarter was $19.2 million, an increase of 73% on year-over-year basis. This was primarily the result of strong performance associated with the Company's continued efforts to develop its sales distribution channels. Wholesale revenue increased 143% year-over-year to $15.9 million, or 83% of total revenue, and includes the effect of the recording of a $2.2 million sales return allowance in 2006, which reduced 2006 revenues. Other revenue decreased 24% year-over-year to $3.1 million, or 16% of revenue in the fourth quarter of 2007, mainly due to a decrease in third-party manufacturing. Retail revenue was $0.2 million in the fourth quarter of 2007, due to the Company's strategy to sell its traditional Chinese medicines at reduced prices through its retail channel due to quality control concerns.
Gross profit in the fourth quarter of 2007 was $8.3 million, an increase of 234% on year-over-year basis. Gross margin was 43.1%, up from 22.3% in the fourth quarter of 2006, primarily due to production efficiencies as well as the recording of a sales allowance in the fourth quarter of 2006, which decreased revenue by $2.2 million.
Operating expenses in the fourth quarter of 2007 were $4.8 million, up 85% from $2.6 million in the fourth quarter of 2006. This increase was primarily the result of higher selling expenses associated with the Company's sales growth. Research and development expenses were $0.9 million in the fourth quarter of 2007, compared with $0.1 in the fourth quarter of 2006. General and administrative expenses were $0.4 million, down from $0.7 million a year ago. Operating expenses were 25% of total revenue in the fourth quarter of 2007, up from 24% in the fourth quarter of 2006.
Operating income was $3.4 million, compared with an operating loss of $0.1 million in the fourth quarter of 2006.
Net income for the fourth quarter of 2007 was $5.1 million, or $0.12 per diluted share, compared to loss of $0.1 million, or ($0.00) per fully diluted share, in the fourth quarter of 2006. Adjusting net income for non-cash financing costs associated with its convertible notes, and a one-time forgiveness of income and value added taxes of $2.2 million, adjusted net income was $3.4 million, or $0.08 per fully diluted share, in the fourth quarter of 2007, up 68% from adjusted net income of $2.0 million, or $0.05 per fully diluted share, in the fourth quarter of 2006.
Full Year 2007 Results
For the full year 2007, total revenues were $56.9 million, up 57% from $36.2 million in 2006. Wholesale revenue increased 64% in 2007 $41.7 million, or 73% of total revenue, and includes the effect of a $2.2 million reversal of a sales return allowance originally recorded in 2006. Other revenue increased 62% in 2007 to $11.8 million, or 21% of revenue in 2007. Retail revenue was relatively unchanged at $3.5 million. Gross profit for the full year 2007 was $23.2 million, an increase of 130% from $10.1 million in 2006. Gross margin was 40.8%, up from 27.8% in 2006. Operating income was $11.3 million, up 153% from $4.5 million in 2006. Net income for 2007 was $11.2 million, or $0.26 per diluted share, compared to $4.1 million, or $0.10 per diluted share, in 2006. Adjusting net income for non-cash financing costs associated with its convertible notes, the previously mentioned one-time reversal of a sales allowance and a one-time forgiveness of income and value added taxes, adjusted net income was $8.5 million, or $0.19 per fully diluted share, in 2007, up 34% from adjusted net income of $6.3 million, or $0.16 per fully diluted share, in 2006.
Financial Condition
As of December 31, 2007, Lotus had $4.6 million in cash and equivalents, approximately $24.7 million in working capital, secured convertible notes of $2.6 million and $4.7 million in notes payable. Stockholders' equity at December 31, 2007 was $26.6 million, up 126% from $11.8 million at December 31, 2006.
In 2008 the Company received net proceeds from the sale of shares of its Series A Convertible 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 will be used for working capital purposes.
2008 Outlook
''In 2008, we expect to see continued growth in sales and anticipate a growing contribution from sales of our proprietary products. We plan to utilize the capital raised in our private placement to fund our exciting new R&D initiatives and to strengthen our sales channels. Additionally, we plan to diversify our products,'' said Mr. Liu. ''We recently completed a $5.0 million private placement financing which provides us with the resources we need to pursue our R&D efforts and pursue strategic acquisitions. Additionally, we plan to use our sales and marketing expertise and the benefits of scale to improve profitability. We believe we are in a very strong position to take advantage of the growing pharmaceutical market in China, and are committed to maximizing value to our shareholders now and in the future.''
Conference Call
The Company will conduct a conference call at 9:00 a.m. Eastern Time on Thursday, April 17, 2008 to discuss the fourth quarter and fiscal year 2007 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-688-0796. International callers should dial 617-614-4070. The Conference ID for this call is 615 756 86. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Thursday, April 17, 2008 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010, international callers dial 617-801-6888, conference ID 35016441.
Use of Non-GAAP Financial Information
GAAP results for the three and twelve month periods ended December 31, 2007 and December 21, 2006 include certain non-cash debt financing expenses related to the Company's convertible notes, a $2.2 million one-time reversal of a sales allowance in 2007 that was originally recorded in the fourth quarter of 2006 and a one-time tax relief of $2.2 million recorded in the fourth quarter of 2007. 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.,
+1-877-801-0344, or info@LotusEast.com; Mr. Crocker Coulson, President of
CCG Elite Investor Relations Inc., +1-646-213-1915 (New York), or
crocker.coulson@ccgir.com
Web site: http://www.LotusEast.com/
