Simcere Pharmaceutical Group Reports Unaudited Second Quarter 2010 Results
NANJING, China, Aug. 12 /PRNewswire-Asia/ -- 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 unaudited financial results for the quarter ended June 30, 2010.
Highlights
Total revenue was RMB544.6 million (US$80.3 million) for the second quarter of 2010, compared to RMB424.4 million for the same period in 2009, representing year-over-year growth of 28.3%. For the first six months of 2010, total revenue was slightly over RMB1.0 billion (US$147.9 million), representing an increase of 15.7% from RMB866.9 million for the same period in 2009.
Gross margin for the second quarter of 2010 increased to 86.8% compared to 82.3% for the same period in 2009. For the first six months of 2010, gross margin increased to 83.5%, compared to 82.4% in the first six months of 2009. Excluding the one-time adjustments related to Jiangsu Yanshen Biological Technology Stock Co., Ltd. ("Jiangsu Yanshen"), gross margin for the second quarter would have been 85.0%.
Income from operations was RMB62.7 million (US$9.2 million) for the second quarter of 2010, an increase of 65.6% from RMB37.9 million for the same period in 2009. For the first six months of 2010, income from operations was RMB93.6 million (US$13.8 million), which represented a decrease of 5.4% from RMB98.9 million for the same period in 2009.
Net income attributable to Simcere was RMB38.6 million (US$5.7 million) for the second quarter of 2010, an increase of 3.6% from RMB37.2 million for the same period in 2009. For the first six months of 2010, net income was RMB59.0 million (US$8.7 million), which represented a decrease of 30.9% from RMB85.4 million for the same period in 2009. The decrease was primarily due to the increase in bills factoring interest expenses paid to the financial institutions, approximately 35% of equity interest in losses of Shanghai Celgen Bio-Pharmaceutical Co., Ltd. which was acquired in August 2009 and income tax expenses.
"We are pleased to report strong top line growth and operating margin expansion for the second quarter. In particular, we were encouraged by Endu's strong performance as we began to see the positive effects of our sales force restructuring," said Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere Pharmaceutical Group.
"During the quarter, we invested in advertising for two of our OTC branded generics, Yingtaiqing and Biqi, and conducted marketing activities around newly launched products. While we are confident that these investments will result in stronger future sales, they resulted in significantly higher marketing expenses for the quarter."
Mr. Ren concluded, "Looking forward, as we continue to invest in both new product development and marketing, I am confident that we will build an even stronger foundation for Simcere's sustainable future growth."
2010 Second Quarter Financial Results
Total revenue for the second quarter of 2010 was RMB544.6 million (US$80.3 million), compared to RMB424.4 million for the same period in 2009, representing year-over-year growth of 28.3%. For the first six months of 2010, total revenue was RMB1,0032 million (US$147.9 million), representing an increase of 15.7% from RMB866.9 million for the same period in 2009.
Revenue from edaravone injection products under the brand names Bicun and Yidasheng increased by 5.6% to RMB193.3 million (US$28.5 million) for the second quarter of 2010 from RMB183.0 million for the same period in 2009. Sales of edaravone injection products constituted 35.9% of the Company's product revenue for the second quarter of 2010. For the first six months of 2010, revenue from Bicun and Yidasheng totaled RMB366.7 million (US$54.1 million), which represented an increase of 7.0% from RMB342.6 million for the same period in 2009.
Revenue from Endu, the Company's patented anti-cancer biotech product, increased by 67.6% to RMB53.7 million (US$7.9 million) in the second quarter of 2010 from RMB32.1 million for the same period in 2009. Sales of Endu constituted 10.0% of the Company's product revenue for the second quarter of 2010. For the first six months of 2010, revenue from Endu totaled RMB91.2 million (US$13.4 million), which represented an increase of 32.9% from RMB68.6 million for the same period in 2009.
Revenue from Sinofuan, a 5-FU sustained release implant for the treatment of cancer, increased by 21.9% to RMB42.1 million (US$6.2 million) for the second quarter of 2010 from RMB34.6 million for the same period in 2009. Sales of Sinofuan constituted 7.8% of the Company's product revenue for the second quarter of 2010. For the first six months of 2010, revenue from Sinofuan totaled RMB67.5 million (US$10.0 million), which represented an increase of 13.1% from RMB59.7 million for the same period in 2009.
Revenue from other branded generic products including Zailin and Yingtaiqing increased by 28.8% to RMB218.8 million (US$32.3 million) in the second quarter of 2010 from RMB169.8 million for the same period in 2009. Sales of other branded generic products constituted 40.6% of the Company's product revenue for the second quarter of 2010. For the first six months of 2010, revenue from other branded generic products totaled RMB411.1 million (US$60.6 million), which represented an increase of 7.3% from RMB383.2 million for the same period in 2009.
The Company's newly-launched products including Anxin, a biapenem injection, Shufutan, a rosuvastatin calcium tablet, and Xinta, a leveamlodipine besylate tablet, continued to build hospital penetration and market recognition. All three drugs have been included in the national reimbursement list and should benefit when the list becomes active.
Gross margin for the second quarter of 2010 increased to 86.8% compared to 82.3% for the same period in 2009. The increase was primarily due to an increase in the revenue of high gross profit margin products. For the first six months of 2010, gross margin increased to 83.5%, compared to 82.4% in the first six months of 2009. Excluding the one-time adjustments related to Jiangsu Yanshen, gross margin for the second quarter would have been 85.0%.
Research and development expenses for the second quarter of 2010 totaled RMB31.2 million (US$4.6 million) which represented an increase of 24.8% from RMB25.0 million for the same period in 2009. This increase was due primarily to increased expenditure on on-going research and development projects. As a percentage of total revenue, research and development expenses was 5.7% for the second quarter of 2010. For the first six months of 2010, research and development expenses totaled RMB61.8 million (US$9.1 million), compared to RMB50.0 million for the same period in 2009.
Sales, marketing and distribution expenses for the second quarter of 2010 were RMB319.9 million (US$47.2 million), which represented an increase of 35.9% from RMB235.5 million for the same period in 2009. As a percentage of total revenue, sales, marketing and distribution expenses increased to 58.8% for the second quarter of 2010 from 55.5% for the same period in 2009. This increase was due primarily to higher advertising expenses for two of the Company's OTC branded generics, Yingtaiqing and Biqi,as well as marketing activities for newly-launched products. For the first six months of 2010, sales, marketing and distribution expenses were RMB556.8 million (US$82.1 million), which represented an increase of 22.3% from RMB455.3 million for the same period in 2009.
General and administrative expenses were RMB58.6 million (US$8.6 million) for the second quarter of 2010, which represented an increase of 15.2% from RMB50.9 million for the same period in 2009. As a percentage of total revenue, general and administrative expenses decreased to 10.8% for the second quarter of 2010 from 12.0% for the same period in 2009. For the first six months of 2010, general and administrative expenses were RMB125.9 million (US$18.6 million), which represented an increase of 14.2% from RMB110.2 million for the same period in 2009.
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 RMB7.4 million (US$1.1 million) for the second quarter of 2010. Share-based compensation expenses for the second quarter of 2009 were RMB5.6 million. For the first six months of 2010, share-based compensation expenses totaled RMB15.4 million (US$2.3 million), which represented an increase of 29.5% from RMB11.9 million for the same period in 2009.
Income from operations was RMB62.7 million (US$9.2 million) for the second quarter of 2010, which represented an increase of 65.6% from RMB37.9 million for the same period in 2009. For the first six months of 2010, income from operations was RMB93.6 million (US$13.8 million), which represented a decrease of 5.4% from RMB98.9 million for the same period in 2009.
Income tax expense for the second quarter of 2010 was RMB10.2 million (US$1.5 million), compared to an income tax benefit of RMB3.4 million for the same period in 2009. The benefit in 2009 was primarily due to the reduced income tax rates for certain operating subsidiaries in the PRC effective from 2009. For the first six months of 2010, income tax expense was RMB11.5 million (US$1.7 million) compared to RMB4.2 million for the same period in 2009.
Net income attributable to Simcere was RMB38.6 million (US$5.7 million) for the second quarter of 2010, compared to RMB37.2 million for the same period in 2009. Net margin, representing net income divided by total revenue, was 7.1% for the second quarter of 2010, compared to 8.8% for the second quarter of 2009. For the first six months of 2010, net income was RMB59.0 million (US$8.7 million), which represented a decrease of 30.9% from RMB85.4 million for the same period in 2009. Net margin for the first six months of 2010 was 5.9% as compared to 9.9% for the same period in 2009.
Basic and diluted earnings per American Depository Share ("ADS") for the second quarter of 2010 were RMB0.71 (US$0.10) and RMB0.69 (US$0.10), respectively. Basic and diluted earnings per ADS for the first six months of 2010 were RMB1.08 (US$0.16) and RMB1.05 (US$0.16) respectively. One ADS represents two ordinary shares of the Company.
As of June 30, 2010, the Company had cash, cash equivalents and restricted cash of RMB235.8 million (US$34.8 million), compared to RMB458.1 million as of December 31, 2009.
Financial Information
The 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.
The Company previously announced that its preliminary unaudited first quarter 2010 financial results were subject to the completion of the impairment review of goodwill and intangible assets and the purchase price allocation with respect to the Company's acquisition of Jiangsu Yanshen. Management has completed the goodwill impairment analysis and the purchase price allocation. The revision has resulted in an increase in net income attributable to Simcere of RMB4.2 million which has been recognized in the second quarter of 2010.
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 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 Company's results for the second quarter of 2010 on Thursday, August 12, at 8:00 a.m. Eastern Time (Thursday, August 12 at 8:00 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for second quarter of 2010 and to answer questions.
To access the conference call, please dial:
United States toll-free dial-in number: +1 866 277 1184
United States toll/International dial-in number: +1 617 597 5360
South China toll-free/China Telecom dial-in number: +86 10 800 130 0399
North China toll-free/China Telecom dial-in number: +86 10 800 152 1490
South China toll-free/China Netcom dial-in number: +86 10 800 852 1490
Hong Kong dial-in number: +852 3002 1672
Please ask to be connected to Simcere's Q2 2010 earnings call and provide the following passcode: 23060010. 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 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
United States toll/International dial-in number: +1 617 801 6888
The passcode for replay participants is: 80027885. 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 generic and proprietary pharmaceuticals in China. In recent years, Simcere has been focusing its strategy on the development of innovative pharmaceuticals and first-to-market generics, and has introduced an innovative anti-cancer medication Endu, a first-to-market medication Sinofuan, and first-to-market generics such as Bicun and Anxin. Simcere manufactures and sells antibiotics, anti-cancer medication, stroke management medication and biopharmaceutical drugs such as vaccines. 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, orthopaedics and infectious diseases. For more information about Simcere Pharmaceutical Group, please visit http://www.simcere.com .
For more information, please contact:
Investor and Media Contacts:
Email: [email protected]
In Nanjing:
Frank Zhao
Chief Financial Officer
Simcere Pharmaceutical Group
Tel: +86-25-8556-6666 x8818
In Beijing:
Ruirui Jiang
Brunswick Group
Tel: +86-10-6566-2256
In the United States:
Kate Tellier
Brunswick Group
Tel: +1-212-333-3810
In Hong Kong:
Joseph Lo Chi-Lun
Brunswick Group
Tel: +852-3512-5000
SIMCERE PHARMACEUTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT SHARE AND ADS DATA)
Three months ended June 30,
2009 2010 2010
RMB RMB USD
Product revenue 422,862 538,990 79,479
Other revenue 1,514 5,578 823
Total revenue 424,376 544,568 80,302
Cost of materials and production (75,113) (72,099) (10,632)
Gross profit 349,263 472,469 69,670
Operating expenses:
Research and development (24,997) (31,195) (4,600)
Sales, marketing and distribution (235,509) (319,945) (47,179)
General and administrative (50,898) (58,640) (8,647)
Income from operations 37,859 62,689 9,244
Interest income 2,948 1,066 157
Interest expense (2,172) (4,052) (598)
Foreign currency exchange gains 312 1,150 170
Other income 1,092 1,090 161
Equity in losses of equity method
affiliated companies -- (3,253) (480)
Earnings before income taxes 40,039 58,691 8,654
Income tax benefit (expense) 3,424 (10,215) (1,506)
Net Income 43,463 48,476 7,148
Less: Net income attributable to the
noncontrolling interest (6,222) (9,910) (1,461)
Net income attributable to Simcere 37,241 38,566 5,687
Earnings per share attributable to
Simcere:
Basic 0.32 0.35 0.05
Diluted 0.32 0.35 0.05
Earnings per ADS attributable to
Simcere:
Basic 0.64 0.71 0.10
Diluted 0.63 0.69 0.10
Weighted average number of common
shares:
Basic 116,136,745 108,889,747 108,889,747
Diluted 117,492,520 111,633,592 111,633,592
Six months ended June 30,
2009 2010 2010
RMB RMB USD
Product revenue 859,496 996,638 146,964
Other revenue 7,386 6,599 973
Total revenue 866,882 1,003,237 147,937
Cost of materials and production (152,433) (165,195) (24,360)
Gross profit 714,449 838,042 123,577
Operating expenses:
Research and development (50,044) (61,787) (9,111)
Sales, marketing and distribution (455,288) (556,824) (82,109)
General and administrative (110,186) (125,880) (18,562)
Income from operations 98,931 93,551 13,795
Interest income 5,517 2,362 348
Interest expense (4,675) (9,017) (1,330)
Foreign currency exchange gains 228 1,217 179
Other income 1,092 1,091 161
Equity in losses of equity method
affiliated companies -- (7,703) (1,136)
Earnings before income taxes 101,093 81,501 12,017
Income tax benefit (expense) (4,168) (11,531) (1,700)
Net Income 96,925 69,970 10,317
Less: Net income attributable to the
noncontrolling interest (11,511) (10,922) (1,611)
Net income attributable to Simcere 85,414 59,048 8,706
Earnings per share attributable to
Simcere:
Basic 0.72 0.54 0.08
Diluted 0.72 0.53 0.08
Earnings per ADS attributable to
Simcere:
Basic 1.44 1.08 0.16
Diluted 1.43 1.05 0.16
Weighted average number of common
shares:
Basic 118,368,384 109,457,384 109,457,384
Diluted 119,050,014 112,221,031 112,221,031
SIMCERE PHARMACEUTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS EXPRESSED IN THOUSANDS)
December 31, June 30, June 30,
2009 2010 2010
RMB RMB USD
Assets
Current assets
Cash, cash equivalents and
restricted cash 458,145 235,822 34,774
Accounts and bills
receivable, net 704,321 712,622 105,083
Inventories 106,655 106,624 15,723
Other current assets 102,743 95,351 14,061
Total current assets 1,371,864 1,150,419 169,641
Property, plant and
equipment, net 744,713 782,665 115,412
Land use rights 146,158 144,556 21,316
Goodwill and intangible
assets, net 695,267 674,476 99,458
Investments in and advance
to affiliated companies 121,865 127,379 18,783
Other assets 58,035 142,684 21,040
Total assets 3,137,902 3,022,179 445,650
Liabilities
Current liabilities
Short-term borrowings and
current portion of long-
term debts 76,000 86,000 12,682
Accounts payable 41,439 43,246 6,377
Bills payable 110,810 -- --
Other payables and accrued
liabilities 464,616 478,054 70,493
Total current liabilities 692,865 607,300 89,552
Long-term debts, excluding
current portion 122,685 98,003 14,452
Deferred tax liabilities 93,108 88,286 13,019
Other liabilities 21,561 22,077 3,255
Total liabilities 930,219 815,666 120,278
Shareholders' equity
Simcere shareholders' equity
Ordinary shares at par 8,716 8,530 1,258
Additional paid-in capital 1,170,687 1,090,829 160,853
Accumulated other
comprehensive loss (43,886) (34,720) (5,120)
Retained earnings 846,707 905,755 133,563
Total equity attributable
to Simcere 1,982,224 1,970,394 290,554
Noncontrolling interest 225,459 236,119 34,818
Total shareholders' equity 2,207,683 2,206,513 325,372
Commitments and contingencies
Total liabilities and
shareholders' equity 3,137,902 3,022,179 445,650
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 = RMB6.7815 on June 30, 2010 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 USD at that rate on the reporting dates.
SOURCE Simcere Pharmaceutical Group
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