Simcere Pharmaceutical Group Reports Preliminary Unaudited First Quarter 2013 Results

NANJING, China, May 9, 2013 /PRNewswire/ -- Simcere Pharmaceutical Group ("Simcere" or the "Company") (NYSE: SCR), a leading pharmaceutical company specializing in the development, manufacturing, and marketing of branded generic and proprietary pharmaceuticals in China, today reported preliminary unaudited financial results for the quarter ended March 31, 2013.

Highlights

• Total revenue was RMB528.7 million (US$85.1 million) for the first quarter of 2013, compared to RMB487.6 million for the same period in 2012, representing an increase of 8.4%.
• Gross margin for the first quarter of 2013 was 79.2%, compared to 82.0% for the same period in 2012.
• Income from operations was RMB50.2 million (US$8.1 million) for the first quarter of 2013, compared to RMB43.3 million for the same period in 2012, representing an increase of 16.0%.
• Net income attributable to Simcere was RMB29.9 million (US$4.8 million) for the first quarter of 2013, an increase of 4.6% from RMB28.6 million for the same period in 2012.

Mr. Hongquan Liu, Executive Director and Chief Executive Officer of Simcere Pharmaceutical Group, commented, "We experienced moderate sales growth in the first quarter despite sustained pricing restrictions from the government and intensifying competition. I am pleased that our overall business performance improved during the quarter and that both Sales and Marketing expenses and General and Administrative expenses as percentages of our total revenue decreased slightly."

On March 11, 2013, the Company announced that it received a "going private" proposal. Simcere's Board of Directors has formed a special committee to consider the proposed transaction.

2013 First Quarter Financial Results

Total revenue for the first quarter of 2013 was RMB528.7 million (US$85.1 million), compared to RMB487.6 million for the same period in 2012, representing an increase of 8.4%.

The table below sets forth the Company's top 10 products by revenue for the three months ended March 31, 2013:

For more information about the above products, please visit our corporate website: www.simcere.com

Gross margin for the first quarter of 2013 was 79.2%, compared to 82.0% for the same period in 2012. The decrease was primarily due to the percentage decrease in sales of drugs with higher gross margins and certain fixed overhead costs incurred before the commercial production of influenza vaccine products.

Research and development expenses for the first quarter of 2013 totaled RMB44.9 million (US$7.2 million), which represented a decrease of 7.0% from RMB48.3 million for the same period in 2012. The decrease was primarily due to the completion of development of the Company's influenza vaccine product and its transition to commercial manufacturing. As a percentage of total revenue, research and development expenses decreased to 8.5% for the first quarter of 2013 from 9.9% for the same period in 2012.

Sales, marketing and distribution expenses for the first quarter of 2013 were RMB259.6 million (US$41.8 million), which represented an increase of 0.3% from RMB258.8 million for the same period in 2012. As a percentage of total revenue, sales, marketing and distribution expenses decreased to 49.1% for the first quarter of 2013 from 53.1% for the same period in 2012.

General and administrative expenses were RMB64.0 million (US$10.3 million) for the first quarter of 2013, which represented a decrease of 1.6% from RMB65.1 million for the same period in 2012. As a percentage of total revenue, general and administrative expenses decreased to 12.1% for the first quarter of 2013 from 13.3% for the same period in 2012.

Share-based compensation expenses, which were allocated to research and development expenses, sales, marketing and distribution expenses, and general and administrative expenses, based on the nature of the work that the relevant employee was assigned to perform, totaled RMB9.8 million (US$1.6 million) for the first quarter of 2013. Share-based compensation expenses for the first quarter of 2012 were RMB3.8 million. The increase was primarily due to restricted shares granted to our management in the second half of 2012.

Income from operations was RMB50.2 million (US$8.1 million) for the first quarter of 2013, representing an increase of 16.0% from RMB43.3 million for the same period in 2012.

Income tax expense for the first quarter of 2013 was RMB6.5 million (US$1.0 million), compared to income tax expense of RMB2.6 million for the same period in 2012. The effective income tax rate increased to 23.9% in the first quarter of 2013 from 10.4% for the same period in 2012. The lower effective income tax rate in the first quarter of 2012 was primarily due to the impact of other operating income of RMB15.6 million in the first quarter of 2012 recorded by our subsidiary located in the British Virgin Islands which is not subject to income tax.

Net income attributable to Simcere was RMB29.9 million (US$4.8 million) for the first quarter of 2013, compared to RMB28.6 million for the same period in 2012. Net margin, representing net income attributable to Simcere divided by total revenue, was 5.7% for the first quarter of 2013, compared to 5.9% for the same period in 2012.

Basic and diluted earnings per American Depository Share ("ADS") for the first quarter of 2013 were RMB0.57 (US$0.09) and RMB0.56 (US$0.09), respectively. One ADS represents two ordinary shares of the Company.

As of March 31, 2013, the Company had cash and pledged bank deposits of RMB332.9 million (US$53.6 million), compared to RMB201.6 million as of December 31, 2012.

Financial Information

The preliminary unaudited condensed consolidated statements of income and balance sheets accompanying this press release have been prepared by management using U.S. GAAP. This preliminary financial information is not intended to fully comply with U.S. GAAP because it does not present all of the financial information and disclosures required by U.S. GAAP.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of 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 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 filings 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 Company's results for the first quarter of 2013 on Thursday, May 9, at 8:00 a.m. Eastern Time (Thursday, May 9 at 8:00 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for the first quarter of 2013 and to answer questions.

To access the conference call, please dial:

Please ask to be connected to Q1 2013 Simcere Pharmaceutical Group Earnings Conference Call and provide the following passcode: 58031483.

Simcere will also 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 www.simcere.com.

Following the earnings conference call, an archive of the call will be available by dialing:

The passcode for replay participants is 58031483. The telephone replay also will be archived on the "Investor Relations" section of the company's web site for seven days following the earnings announcement.

About Simcere Pharmaceutical Group

Simcere Pharmaceutical Group (NYSE:SCR, Simcere) is a leading pharmaceutical company specializing in the development, manufacturing, and marketing of branded and proprietary pharmaceuticals in China. 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, cardiovascular disease, infectious diseases and pain. For more information about Simcere Pharmaceutical Group, please visit www.simcere.com.

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 = RMB6.2108 on March 31, 2013 as set forth in the H.10 statistical release of the Federal Reserve Board. 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.

SOURCE Simcere Pharmaceutical Group