NANJING, China, May 15 /Xinhua-PRNewswire/ -- Simcere Pharmaceutical Group , a leading manufacturer and supplier of branded generic pharmaceuticals in China, today reported unaudited financial results for the first quarter ended March 31, 2007.
First Quarter 2007 Highlights -- Total revenues increased 31.7% year-over-year to RMB 312.3 million (US$ 40.4 million); -- Net income increased 155.6% to RMB 66.9 million (US$ 8.7 million) in the first quarter of 2007 from RMB 26.2 million in the same period a year ago; and -- Gross margin increased to 81.7 % for the first quarter of 2007 from 78.8% in the same period a year ago. The improvement in gross margin reflects increased revenue contribution from higher gross margin products and continued stabilization of cost of sales.
“We are pleased to report strong results for the first quarter of 2007,” said Mr. Jinsheng Ren, Chairman and CEO of Simcere Pharmaceutical Group. “During the first quarter, we continued to enhance our market position through expanding hospital coverage and channel penetration. For example, in order to deepen the market penetration of Bicun, we hosted about 100 medical seminars across China and generated increasing awareness of Bicun among doctors. By the end of the first quarter, Bicun had been prescribed by approximately 1,000 hospitals in China. In the first quarter, we were able to increase Endu’s coverage in more than 100 hospitals. As of March 31, 2007, there were more than 500 hospitals prescribing Endu to treat their cancer patients.”
Mr. Ren continued, “Progress made in the development of pipeline products and extended clinical trials for Endu was in line with our expectation. We aim to obtain the SFDA approval for two of our pipeline products, Biapenem and Palonosetron, during the fourth quarter of 2007 and first half of 2008, respectively.”
Mr. Ren concluded, “Our growth in both total revenues and net income is a validation of our strengthened and improved business model, which aims to focus our resources on first-to-market and new drugs. On April 25, 2007, we successfully completed our initial public offering. We believe that, with the superior capital strength obtained from this offering, we are well-positioned to leverage our strong product development capabilities and well-established nationwide sales and distribution network to emerge as a leader in the pharmaceutical industry in China.”
Mr. Frank Zhao, CFO of Simcere Pharmaceutical Group, commented, “Strong revenue growth of our first-to-market branded generic drug Bicun and our new anti-cancer drug Endu contributed greatly to our first quarter financial result. Our successful initial public offering further strengthened our cash position and will broaden our acquisition opportunities for business or products with great commercialization potential.”
First Quarter 2007 Financial Results
Total revenues for the first quarter of 2007 were RMB 312.3 million (US$ 40.4 million), representing an increase of 31.7% from RMB 237.1 million reported for the same period in 2006;
Revenues from top five branded generic pharmaceutical products for the first quarter of 2007 totaled RMB 238.6 million (US$ 30.9 million), contributing 76.4% of the Company’s total revenues and representing an increase of 19.9% from RMB 198.9 million for the same period in 2006;
Revenue from Endu, the Company’s first anti-cancer drug launched in July 2006, totaled RMB 39.0 million (US$ 5.1 million) in the first quarter of 2007, representing 12.5% of the Company’s total revenue.
Gross margin for the first quarter of 2007 was 81.7%, as compared to 78.8 % in the corresponding period a year ago. The higher gross margin was primarily due to the continued sales growth of higher margin products Bicun and Endu.
Research and development expenses in the first quarter of 2007 totaled RMB 13.7 million (US$ 1.8 million), an increase of 19.5% from RMB 11.5 million for the corresponding period a year ago;
Sales and marketing expenses were RMB 136.3 million (US$ 17.6 million) for the first quarter of 2007, an increase of 25.9 % from RMB 108.3 million for the corresponding period a year ago. The increase was directly related to the increase of sales;
General and administrative expenses were RMB 30.9 million (US$ 4.0 million) for the first quarter of 2007, an increase of 14.6% from RMB 27.0 million for the corresponding period a year ago.
Share-based compensation expenses, which were allocated to research and development expenses, sales and marketing expenses, and general and administrative expenses, respectively, based on the nature of the work the Company’s employees were assigned to perform, totaled RMB 6.8 million (US$ 0.9 million ) for the first quarter of 2007.
Operating income was RMB 74.0 million (US$ 9.6 million) for the first quarter of 2007, as compared to RMB 40.0 million for the corresponding period of 2006.
Interest expense was RMB 4.0 million (US$ 0.5 million) for the first quarter of 2007, compared to RMB 2.4 million for the corresponding period a year ago. The higher interest expense is due to the increased average balance of the Company’s short-term loan for the first quarter of 2007.
Net income was RMB 66.9 million (US$ 8.7 million) for the first quarter of 2007, compared to RMB 26.2 million in the corresponding period a year ago. The Company’s net margin increased to 21.4% for the first quarter of 2007 compared to 11.0% for the corresponding period a year ago.
The basic earnings per ADS for the first quarter of 2007 was RMB 1.34 (US$ 0.17), the diluted earnings per ADS for the first quarter of 2007 was RMB 1.30 (US$ 0.17), compared to basic and diluted earnings per ADS of RMB 0.74 for the corresponding period a year ago. 1 ADS represents 2 ordinary shares.
Net income excluding share-based compensation expenses (non-GAAP) was RMB 73.8 million (US$ 9.6 million) in the first quarter of 2007, representing a 181.7% increase from the first quarter of 2006.
As of March 31, 2007, the Company had cash of RMB 102.3 million (US$ 13.3 million). Outstanding short-term loan was RMB 288.0 million (US$ 37.3 million). In April 2007, the Company received net proceeds of approximately US$162 million from its initial public offering on the New York Stock Exchange.
Financial Outlook
Based on current operating and market conditions, Simcere’s targeted total revenues for the full year 2007 are expected to be between RMB1.33 billion (US$172.2 million) and RMB1.4 billion (US$181.3 million) and Simcere’s target annual net income for the full year 2007 is expected to be between RMB270 million (US$35.0 million) and RMB280 million (US$36.3 million).
Non-GAAP Disclosure
In addition to the unaudited consolidated financial information presented in accordance with US GAAP, Simcere’s management uses a non-GAAP measure of net income excluding non-cash share-based compensation. Simcere’s management believes excluding the share-based compensation expenses from non-GAAP financial measures is useful for the investors’ understanding of overall current financial performance. Nevertheless, the limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share- based compensation expenses have been and will continue to be a significant recurring expense in the Company’s business.
The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures” set forth at the end of this release, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions. In particular, the projected full year 2007 data regarding the total net revenues and net income are forward-looking statements. These forward looking statements are based upon management’s current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Further information regarding these and other risks is included in Simcere’s filing with the U.S. Securities and Exchange Commission at www.sec.gov. Simcere does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Conference Call
Simcere Pharmaceutical Group will host a conference call to discuss the first quarter 2007 earnings at 8 pm Eastern Time, May 15, 2007 (Beijing/Hong Kong time: May 16, 2007 at 8 am). The management team will be on the call to discuss quarterly results and highlights and to answer questions.
Dial-in details for the earnings conference call are as follows: US toll free dial in number: 866-713-8310 US toll dial in number: 617-597-5308 HK toll dial in number: +852-3002-1672 Pass code for all regions: Simcere
Following the earnings conference call, an archive of the call will be available by dialing:
US toll free dial in number: 888-286-8010
International dial in number: 617-801-6888
Pass code: 73035007
The conference call will also be available on web site http://www.simcere.com for seven days.
About Simcere Pharmaceutical Group
Simcere Pharmaceutical Group is a leading manufacturer and supplier of branded generic pharmaceuticals in the rapidly growing China market. In recent years, Simcere Pharmaceutical Group has focused its strategy on the development of first-to-market generic and innovative pharmaceuticals, and has introduced a first-to-market generic anti-stroke medication under the brand name Bicun and an innovative anti-cancer medication under the brand name Endu. Simcere Pharmaceutical Group currently manufactures and sells 35 pharmaceutical products including antibiotics, anti-cancer medication and anti-stroke medication and is the exclusive distributor of three additional pharmaceuticals that are marketed under its brand names. Simcere concentrates its research and development efforts on the treatment of diseases with high incidence and/or mortality rates and for which there is a clear demand for more effective pharmacotherapy such as cancer, strokes, osteoporosis and infectious diseases. For more information about Simcere Pharmaceutical Group, please visit http://www.simcere.com .
SIMCERE PHARMACEUTICAL GROUP CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, Amounts expressed IN THOUSANDS, EXCEPT PER SHARE AND PER ADS DATA) Period ended March 31, 2006 2007 2007 RMB RMB USD Product revenues 237,076 312,272 40,433 Cost of materials and production (50,339) (57,267) (7,415) Gross profit 186,737 255,005 33,018 Operating expenses: Research and development expenses (11,499) (13,746) (1,780) Sales, marketing and distribution expenses (108,279) (136,303) (17,649) General and administrative expenses (26,982) (30,930) (4,005) Income from operations 39,977 74,026 9,584 Interest income 212 486 63 Interest expense (2,440) (4,003) (518) Income before income tax expense and minority interests 37,749 70,509 9,129 Income tax expense (14,631) (1,476) (191) Income before minority interests 23,118 69,033 8,938 Minority interests 3,078 (2,088) (270) Net income 26,196 66,945 8,668 Earnings per share: Basic 0.37 0.67 0.09 Diluted 0.37 0.65 0.08 Earnings per ADS: Basic 0.74 1.34 0.17 Diluted 0.74 1.30 0.17 SIMCERE PHARMACEUTICAL GROUP CONSOLIDATED BALANCE SHEETS (UNAUDITED, Amounts expressed IN THOUSANDS) Dec 31, Mar 31, Mar 31, 2006 2007 2007 RMB RMB USD Assets Current assets Cash 106,027 102,334 13,250 Pledged bank deposits 20,787 15,100 1,955 Accounts receivable, net of allowance for doubtful accounts 61,723 99,723 12,912 Bills receivable 101,058 109,756 14,211 Inventories 39,483 34,847 4,512 Prepaid expenses and other current assets 79,192 86,759 11,234 Amounts due from related parties 434 432 56 Deferred income taxes 2,725 2,247 291 Total current assets 411,429 451,198 58,421 Property, plant and equipment, less accumulated depreciation 267,054 274,450 35,536 Land use rights 82,522 81,546 10,559 Deposits for purchase of property, plant and equipment 4,056 2,761 357 Intangible assets, net 163,148 160,142 20,735 Goodwill 100,634 98,545 12,760 Deferred income taxes 5,704 5,915 766 Total assets 1,034,547 1,074,557 139,134 Liabilities Current liabilities Short-term bank loans and borrowings 333,000 288,000 37,290 Accounts and bills payable 20,089 12,356 1,600 Accrued payroll and employee benefits 23,766 20,724 2,683 Other payables and accrued liabilities 169,874 191,091 24,743 Amounts due to related parties 1,352 1,035 134 Income taxes payable 20,092 21,942 2,841 Total current liabilities 568,173 535,148 69,291 Deferred income taxes 23,634 22,877 2,962 Total liabilities 591,807 558,025 72,253 Minority interests - - - Shareholders’ equity Contributed capital 7,909 7,909 1,024 Additional paid-in capital 265,964 272,811 35,324 Retained earnings 168,867 235,812 30,533 Total shareholders’ equity 442,740 516,532 66,881 Commitments and contingencies Total liabilities, minority interests and shareholders’ equity 1,034,547 1,074,557 139,134
Note: The conversions of Renminbi (RMB) into United States dollars (USD) as at the reporting dates are based on the noon buying rate of USD1.00 = RMB 7.7232 on March 31, 2007, The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on the reporting dates.
RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES (*) (UNAUDITED, EXPRESSED IN RMB THOUSANDS) Three months ended March Three months ended March 31, 2006 31, 2007 GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP Result Result Result Result Income from operations 39,977 39,977 74,026 6,847 80,873 Net income 26,196 26,196 66,945 6,847 73,792 (*) The adjustment is for share-based compensation expenses.
Non-GAAP Disclosure
In addition to the unaudited consolidated financial information presented in accordance with US GAAP, Simcere’s management uses a non-GAAP measure of net income excluding non-cash share-based compensation. Simcere’s management believes excluding the share-based compensation expenses from non-GAAP financial measures is useful for the investors’ understanding of overall current financial performance. Nevertheless, the limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share- based compensation expenses have been and will continue to be a significant recurring expense in the Company’s business.
The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures” set forth at the end of this release, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.
Simcere Pharmaceutical Group
CONTACT: In China, Eric Wang-Lam Cheung, Vice President, InvestorRelations of Simcere Pharmaceutical Group, +86-25-8556 6666 ext. 8898, oreric.cheung@simcere.com; or in the United States, Sarah Lubman of BrunswickGroup LLC, +1-212-333-3810, or ir@simcere.com, for Simcere PharmaceuticalGroup
Web site: http://www.simcere.com//
