HARBIN, China, May 29 /Xinhua-PRNewswire-FirstCall/ -- Renhuang Pharmaceuticals, Inc. ("Renhuang" or "the Company"), a leading pharmaceutical company in the People's Republic of China ("PRC"), today reported solid financial results for the fourth quarter and fiscal year ended October 31, 2007.
"This was a very key year for Renhuang Pharmaceuticals. We performed well on promotions and advertisements and enhanced our production processes. We also focused on our best selling product, Acanthopanax, and continued to work with scientific institutions to enhance our research and development capabilities," said Mr. Shaoming Li, Chairman and CEO of Renhuang. "We will continue to maintain this strategy in the year ahead and plan to explore new markets and increase sales."
Fourth Quarter 2007 Results
Renhuang's total revenues in the fourth quarter were $7.1 million, a slight increase of 5% over the fourth quarter of 2006. This was attributed to sales of its Acanthopanax products, which accounted for about 51% of the total revenues
Gross profit in the fourth quarter of 2007 was $3.6 million, an increase of 19% over the fourth quarter of 2006. Gross margin for the quarter increased to 51% from 45% in the fourth quarter of 2006. This decrease in the cost of production is mainly due to improvements in manufacturing procedures that eliminated unnecessary processes.
Operating expenses in the fourth quarter of 2007 were $2.5 million, up 74% from $1.4 million in the fourth quarter of 2006. This increase was due to higher selling, general and administrative expenses ("SG&A") attributed to the promotion of the Company's top selling Acanthopanax products. Research and development ("R&D") expenses also increased, as the Company initiated development of new products.
Operating expenses represented 35% of total revenues in the fourth quarter of 2007, up from 21% in the fourth quarter of 2006.
Operating income was $1.1 million in the fourth quarter of 2007, down 30% from $1.6 million in first quarter of 2007. Operating margin was 15.5%, as compared to 23.5% during the same period a year ago.
Net income for the fourth quarter of 2007 was $1.1 million, or $0.03 per diluted share, down from $1.6 million, or $0.05 per diluted share in the fourth quarter of 2006.
"During the fourth quarter, we experienced a slight decrease in our net income due to the increase in SG&A and R&D expenses. However, we remain optimistic in our ability to deliver outstanding results for our investors, as we expect to commercialize new products soon, and for our investments in our top selling product, Acanthopanax, to yield increased market share," concluded Mr. Li.
Full Year 2007 Results
For the full year 2007, total revenues were $28.0 million. Gross profit for the full year 2007 was $14.3 million. Gross profit margin was 51% in 2007. Operating income was $9.6 million in 2007. Operating margin was 34% in 2007. Net income for 2007 was $9.6 million or $0.27 per diluted share.
Financial Condition
As of October 31, 2007, Renhuang had approximately $10.2 million in cash and equivalents. Working capital was about $18.8 million, compared to $7.8 million as of October 31, 2006. Stockholders' equity as of October 31, 2007 was $21.4 million, an increase of 101% over the $10.6 million recorded as of October 31, 2006. For the fiscal year ended October 31, 2007, cash provided by operating activities was $8.9 million.
Comparability of Results
On September 7, 2006, the Company completed a share exchange transaction through which it acquired Harbin Renhuang Pharmaceutical Company Limited ("Old Renhuang") and its wholly owned subsidiary, Harbin Renhuang Pharmaceutical Co., Ltd. ("Renhuang China"). The Company was deemed to be the acquirer for accounting purposes. Therefore, the financial statements in this press release are those of Renhuang China for all periods prior to the acquisition on September 7, 2006 and the financial statements of the consolidated companies from the acquisition date forward. On December 5, 2006, the Company changed its fiscal year end from April 30 to October 31. Therefore, the Company's Annual Report on Form 10-K for the period ended October 31, 2006 was a transition report, and included information for the six-month transitional period from May 1, 2006 to October 31, 2006. As a result, this press release includes comparative financial information for the statement of income and statement of cash flows for the six month period ended October 31, 2006, and not for the twelve months ended October 31, 2006.
About Renhuang Pharmaceuticals, Inc.
Founded in 1996, Renhuang Pharmaceuticals, Inc, produces western, traditional Chinese medicines (TCM), and branded pharmaceuticals, using its GMP-certified facilities in China. The Company's GMP-certified manufacturing facilities, containing cutting-edge technologies and advanced equipment, are capable of producing as many as 200 types of pharmaceuticals. Additionally, Renhuang distributes raw materials and finished pharmaceutical products using its extensive distribution channels and third party distributors throughout China. The Company's distribution network includes approximately 25 independent sales distributors, representing over 3,000 sales representatives in 70 sales centers across 24 districts, covering over 50% of the greater China. The Company also exports its products to Russia and Southeast Asia. For more information, visit http://www.renhuang.com .
Safe Harbor Statement
Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
CONTACT: Ms. Shuang Tan, IR Contact of Renhuang Pharmaceuticals, Inc.,
+86-451-5392-5461, or ir@renhuang.com; Mr. Crocker Coulson, President of
CCG Elite Investor Relations Inc., +1-646-213-1915 (New York),
crocker.coulson@ccgir.com
Web site: http://www.renhuang.com/
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