NANJING, China, Nov. 5 /Xinhua-PRNewswire-FirstCall/ -- Simcere Pharmaceutical Group , a leading manufacturer and supplier of branded generic pharmaceuticals and manufacturer of the patented anti-cancer biotech product Endu in China, today reported unaudited financial results for the quarter ended September 30, 2007.
Mr. Jinsheng Ren, Chairman and CEO of Simcere Pharmaceutical Group, commented: “This has been a solid quarter for Simcere. Our lead products Endu and Bicun achieved 377.3% and 83.8% year-over-year growth respectively, driving our business forward and achieving an overall year-over-year growth of 44.5% in terms of revenue, 72.9% in terms of net income, and 38.3% in terms of basic earnings per share. We have also made progress in stabilizing the performance of our generic products during this quarter. We expect the momentum of Endu, Bicun, and other generic products to continue.
In addition, we completed the acquisition of 51% ownership interest in Boda Pharmaceutical on October 1st. After this transaction, we have captured 100% of the fast-growing injectable edaravone market, where Bicun focused primarily on the premium edaravone market while Boda’s Yidasheng on the medium to low end. This strategic acquisition is a good example of our product based M&A strategy, which helps slow down competition pressure for our biggest seller Bicun, while ensuring Simcere’s leading position and strong growth momentum in capturing the whole edaravone market. We believe this will help to maintain the company’s high gross margin and high profitability characteristics.
We are confident that we will meet our 2007 full year performance guidance. Our team will continue to work hard to ensure that Simcere maintains its position as a leading player in the Chinese pharmaceutical industry.”
2007 Third Quarter and Nine Month Financial Results
Total revenue for the third quarter of 2007 was RMB323.4 million (US$43.2 million), representing an increase of 44.5% from RMB223.8 million for the same period in 2006. For the first nine months of 2007, total revenue was RMB990.6
million (US$132.2 million), representing an increase of 42.4% from RMB695.5 million for the same period in 2006.
Revenue from Endu, the Company’s patented anti-cancer biotech drug launched in July 2006, totaled RMB52.8 million (US$7.1 million) in the third quarter of 2007, representing 16.4% of the Company’s product revenue for the quarter and an increase of 377.3% from RMB11.1 million in the corresponding period in 2006. For the first nine months of 2007, revenue from Endu totaled RMB152.2 million (US$20.3 million), representing 15.8% of product revenue.
Revenue from Bicun, the Company’s first-to-market stroke management product, totaled RMB106.2 million (US$14.2 million) in the third quarter of 2007. In the third quarter, Bicun’s revenue represented 32.9% of the company’s product revenue compared to 25.8% in the prior year period, and demonstrated an increase of 83.8% from RMB57.8 million in the corresponding period in 2006. For the first nine months of 2007, revenue from Bicun increased 90.2% to RMB296.5 million (US$39.6 million), representing 30.7% of product revenue, compared to RMB155.9 million, or 22.5% of product revenue, in the first nine months of 2006.
Revenue from other branded generic products for the third quarter of 2007 totaled RMB163.3 million (US$21.8 million), contributing 50.7% of total revenue, representing an increase of 5.4% from RMB154.9 million in the same period in 2006. For the first nine months of 2007, revenue from other generic products totaled RMB516.4 million (US$68.9 million), representing 53.5% of total product revenue, compared to RMB525.8 million or 75.9% of product revenue in the corresponding period in 2006.
Research and development expenses in the third quarter of 2007 totaled RMB19.3 million (US$2.6 million) compared to RMB7.0 million for the corresponding period a year ago. The increase in research and development expenses was primarily related to the Phase IV clinical study for Endu, the expansion of the Company’s research and development department and other ongoing research projects. For the first nine months of 2007, research and development expenses totaled RMB52.4 million (US$7.0 million), compared to RMB23.2 million for the same period in 2006.
Sales and marketing expenses were RMB146.6 million (US$19.6 million) for the third quarter of 2007, an increase of 41.5% from RMB103.6 million for the corresponding period a year ago. For the first nine months of 2007, sales and marketing expenses were RMB441.7 million (US$59.0 million), an increase of 38.6% from RMB318.8 million in the first nine months of 2006. The increase was primarily due to increased marketing expenses associated with the promotion of Simcere’s first-to-market product Bicun and the new drug Endu.
General and administrative expenses were RMB38.2 million (US$5.1 million) for the third quarter of 2007, representing an increase of 72.7% from RMB22.1 million for the corresponding period a year ago. General and administrative expenses as a percentage of the Company’s total revenues increased to 11.8% in the third quarter of 2007 from 9.9% in the corresponding period of 2006. The increased expenses were primarily related to stock option expenses, staff costs and professional service fees associated with being a new public company. For the first nine months of 2007, general and administrative expenses were RMB115.3 million (US$15.4 million), an increase of 61.3% from RMB71.5 million in the corresponding period in 2006.
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 RMB7.5 million (US$1.0 million) for the third quarter of 2007. For the first nine months of 2007, share-based compensation expense totaled RMB22.0 million (US$2.9 million).
Operating income was RMB60.2 million (US$8.0 million) for the third quarter of 2007, as compared to RMB44.2 million for the corresponding period of 2006. For the first nine months of 2007, operating income was RMB211.2 million (US$28.2 million), an increase of 55.5% as compared to RMB135.9 million in the corresponding period in 2006.
Net income was RMB73.1 million (US$9.8 million) for the third quarter of 2007, compared to RMB42.3 million in the corresponding period a year ago. The Company’s net margin was 22.6% for the third quarter of 2007 compared to 18.9 % for the corresponding period a year ago. For the first nine months of 2007, net income was RMB223.2 million (US$29.8 million), an increase of 88.9% as compared to RMB118.1 million in the first nine months of 2006. Net income margin for the first nine months of 2007 was 22.5%, compared to 17.0 % in the corresponding period in 2006.
The basic earnings per ADS for the third quarter of 2007 increased to RMB1.17 (US$0.16) and the diluted earnings per ADS for the third quarter of 2007 increased to RMB1.14 (US$0.15), compared to basic and diluted earnings per ADS of RMB0.85 for the corresponding period a year ago. Each ADS represents two ordinary shares.
Net income excluding share-based compensation expenses (non-GAAP) was RMB80.7 million (US$10.8 million) in the third quarter of 2007 compared to RMB42.3 million, representing a 90.7% increase from the third quarter of 2006. For the first nine months of 2007, net income excluding share-based compensation expenses was RMB245.2 million (US$32.7 million), an increase of 107.6% from RMB118.1 million in the corresponding period in 2006.
As of September 30, 2007, the Company had cash and cash equivalents of RMB684.0 million (US$91.3 million) compared to RMB1.12 billion at the end of the second quarter of 2007. The decrease in cash and cash equivalents is a result of investing RMB450.0 million (US$60.1 million) in fixed income financial products with maturity less than one year with banks and other financial institutions.
On September 28, 2007, the Company entered into a definite agreement to purchase a 51% stake in Jilin Boda Pharmaceutical Co, Ltd. for RMB111.2 million (US$14.8 million) in cash. The transaction was closed on October 1, 2007 and the integration is expected to be completed during the fourth quarter of 2007.
Financial Outlook
Based on current operating and market conditions, management would like to uphold the 2007 full year revenue and net income guidance given out in the prior quarters.
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 quotations from management and information contained in the section Financial Outlook in this press release contain 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 http://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 third quarter 2007 earnings on Monday, November 5, at 8 a.m. Eastern Time (Monday, November 5 at 9 p.m., Beijing/Hong Kong time). The management team will be on the call to discuss quarterly results and highlights and to answer questions.
Please ask to be connected to Simcere’s third quarter 2007 Earnings Call and provide the following passcode: 17992002. Simcere also will broadcast a live audio webcast of the conference call. The broadcast will be available by visiting the “Investor Relations” section of the company’s Web site at http://www.simcere.com .
Following the earnings conference call, an archive of the call will be available by dialing:
United States toll-free dial-in number: + 1 888 286 8010
The passcode for replay participants is: 72545063. The telephone replay also will be archived on the “Investor Relations” section of the company’s Web site at http://www.simcere.com for seven days following the earnings announcement.
About Simcere Pharmaceutical Group
Simcere Pharmaceutical Group is a leading manufacturer and supplier of branded generic pharmaceuticals and manufacturer of the patented anti-cancer biotech product Endu in the rapidly growing China market. In recent years, Simcere has focused its strategy on the development of first-to-market generic and innovative pharmaceuticals, and has introduced a first-to-market generic stoke management medication under the brand name Bicun and an innovative anti-cancer medication under the brand name Endu. Simcere currently manufactures and sells more than 50 pharmaceutical products including antibiotics, anti-cancer medication and stroke management 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 and currently has more than 12 pipeline products. For more information about Simcere Pharmaceutical Group, please visit http://www.simcere.com .
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.
eric.cheung@simcere.comir@simcere.com
CONTACT: In China: Eric Wang Lam Cheung, Vice President of Investor
Relations of Simcere Pharmaceutical Group, +86-25-85566666 x8898, or
eric.cheung@simcere.com; Or In the United States: Michele Loguidice of
Brunswick Group LLC, +1-212-333-3810, or ir@simcere.com, for SCR
Web site: http://www.simcere.com/
