Tongjitang Chinese Medicines Company (NYSE: TCM) (“Tongjitang” or the “Company”), a leading specialty pharmaceutical company focusing on the development, manufacturing, marketing and selling of modernized traditional Chinese medicine in China, today announced its financial results for the quarter ended September 30, 2009 and the repurchase of ordinary shares in a private transaction.
Financial Results for the Quarter Ended September 30, 2009
- Net revenue was RMB104.6 million ($15.3 million), compared to RMB110.4 million in the prior year period.
- Gross margin was 57.6% in the third quarter of 2009, compared to 62.4% in the same period of 2008.
- Net loss attributable to the Company was RMB13.7 million ($2.0 million), which yielded net loss per ADS of RMB0.43 ($0.06) and net loss per share of RMB0.11 ($0.02).
- Non-GAAP loss per share was RMB0.04 ($0.01), compared to non-GAAP earnings per share of RMB0.11 in the third quarter of 2008.
Net revenue for the third quarter of 2009 was RMB104.6 million ($15.3 million), a decrease of 5.3% from RMB110.4 million in the third quarter of 2008. Xianling Gubao (“XLGB”) sales were RMB60.6 million ($8.9 million) in the third quarter of 2009, compared to RMB78.7 million in the third quarter of 2008. Net revenue of the Company’s other core products, including Moisturizing & Anti-itching Capsules and Zaoren Anshen Capsules, increased 4.1% to RMB12.8 million ($1.9 million) from RMB12.3 million in the third quarter of 2008. Revenue contribution from Guizhou Long-Life Pharmaceutical Company Limited (”Guizhou LLF”) was RMB2.6 million ($376,000), compared to RMB5.1 million in the third quarter of 2008. Revenue contribution from Qinghai Pulante Pharmaceutical Co., Ltd. (“Pulante”) was RMB1.9 million ($278,000), roughly flat year over year. Revenue contribution from Anhui Jingfang Pharmaceutical Co., Ltd. (“Jingfang”), which was acquired at the end of the first quarter of 2009, was RMB17.6 million ($2.6 million), compared to RMB14.4 million in the second quarter of 2009.
Xiaochun Wang, Chief Executive Officer and Chairman of Tongjitang, stated, “Our third quarter performance reflects the introduction of the newly-launched sales rebate program to the majority of distributors. As a result of this rebate program, RMB6.2 million has been recorded against revenues year to date. Additionally, even though the Essential Drug List was announced by China’s Ministry of Health during this third quarter, uncertainties regarding execution details and pricing continued to cause hospitals and distributors to destock their inventory levels, leading to low sales during the quarter. However, we believe that such declines in purchases from hospitals and distributors should recover noticeably when the pending Chinese healthcare policies are finalized and disclosed.”
Gross profit was RMB60.3 million ($8.8 million) in the third quarter of 2009, down from RMB69.0 million in the third quarter of 2008. Gross margin was 57.6% in the third quarter of 2009, compared to 62.4% in the same period of 2008. Tongjitang’s decreased gross margin reflects reduced revenues from XLGB and Guizhou LLF (which enjoys a higher margin) and the introduction of sales rebates. The price of barrenwort, used in the production of XLGB, remained stable in the third quarter of 2009.
Operating loss in the third quarter of 2009 was RMB12.8 million ($1.9 million), compared to operating income of RMB7.7 million in the third quarter of 2008, primarily reflecting increased selling and marketing expenses related to Jingfang’s products.
Net loss attributable to the Company was RMB13.7 million ($2.0 million), which yielded net loss per ADS of RMB0.43 ($0.06) and net loss per share2 of RMB0.11 ($0.02).
Non-GAAP net loss in the third quarter of 2009 was RMB5.4 million ($790,000), compared to non-GAAP net income of RMB15.3 million in the third quarter of 2008. Non-GAAP loss per share was RMB0.04 ($0.01), compared to non-GAAP earnings per share of RMB0.11 in the third quarter of 2008. For the third quarter of 2009, the number of shares used in the computation of GAAP and non-GAAP net loss per share was 126.8 million. Please refer to the Company’s GAAP to non-GAAP reconciliation table provided below for additional details.