May 18 2010
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, 2010.
Highlights -- Total revenue was RMB458.7 million (US$67.2 million) for the first quarter of 2010, compared to RMB442.5 million for the same period in 2009, representing year-over-year growth of 3.7%. -- Gross margin for the first quarter of 2010 decreased to 79.7% compared to 82.5% for the same period in 2009. -- Income from operations was RMB30.9 million (US$4.5 million) for the first quarter of 2010, a decrease of 49.5% from RMB61.1 million for the same period in 2009. -- Net income attributable to Simcere was RMB20.5 million (US$3.0 million) for the first quarter of 2010, a decrease of 57.5% from RMB48.2 million for the same period in 2009.
"While the first quarter remained challenging, we saw solid revenue growth for our edaravone products and were encouraged by the continuing sales recovery of Endu," said Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere Pharmaceutical Group. "We believe that we will see additional benefits arising from the restructuring of our sales force for the remainder of 2010."
"Recently we were pleased to announce that Simcere's diosmectite passed EU-GMP inspection and that Endu successfully completed the Phase IV clinical study which verified the positive results of the Phase III study regarding Endu's safety and efficacy," Mr. Ren continued. "Simcere's strategic cardiovascular portfolio also continues to grow with our recently launched cholesterol lowering drug Rosuvastatin and hypertension drug Levamlodipine both performing well. We are confident that these developments should help position Simcere for growth over the mid-to-long-term."
2010 First Quarter Financial Results
Total revenue for the first quarter of 2010 was RMB458.7 million (US$67.2 million), compared to RMB442.5 million for the same period in 2009, representing year-over-year growth of 3.7%.
Revenue from edaravone injection products under the brand names Bicun and Yidasheng increased by 8.5% to RMB173.2 million (US$25.4 million) for the first quarter of 2010 from RMB159.6 million for the same period in 2009. Sales of edaravone injection products constituted 37.8% of the Company's product revenue for the first quarter of 2010.
Revenue from Endu, the Company's patented anti-cancer biotech product, increased by 2.3% to RMB37.4 million (US$5.5 million) in the first quarter of 2010 from RMB36.5 million for the same period in 2009. Sales of Endu constituted 8.2% of the Company's product revenue for the first quarter of 2010.
Revenue from Sinofuan, a 5-FU sustained release implant for the treatment of cancer, increased by 1.0% to RMB25.3 million (US$3.7 million) for the first quarter of 2010 from RMB25.1 million for the same period in 2009. Sales of Sinofuan constituted 5.5% of the Company's product revenue for the first quarter of 2010.
Revenue from other first-to-market products including Jiebaishu, a nedaplatin product, and Anxin, a biapenem injection, increased by 12.7% to RMB8.7 million (US$1.3 million) from RMB7.7 million for the same period in 2009. Sale of other first-to-market products constituted 1.9% of the Company's product revenue for the first quarter of 2010.
Revenue from other branded generic products including Zailin and Yingtaiqing decreased by 10.4% to RMB186.2 million (US$27.3 million) from RMB207.7 million for the same period in 2009. Sales of other branded generic products constituted 40.7% of the Company's product revenue for the first quarter of 2010.
Gross margin for the first quarter of 2010 decreased to 79.7% compared to 82.5% for the same period in 2009. The decrease was primarily due to a decline in other revenue from RMB5.8 million for the first quarter of 2009 to RMB1.0 million (US$0.2 million) for this quarter as well as lower revenue and gross margin contribution from Jiangsu Yanshen. Other revenue was primarily comprised of government subsidies and VAT refund.
Research and development expenses for the first quarter of 2010 totaled RMB30.6 million (US$4.5 million) which represented an increase of 22.1% from RMB25.0 million for the same period in 2009. This increase was due primarily to the increased expenditure on on-going research and development projects and increased salary expenses as a result of an increase in research and development headcount. As a percentage of total revenue, research and development expenses increased to 6.7% for the first quarter of 2010 from 5.7% for the same period in 2009.
Sales, marketing and distribution expenses for the first quarter of 2010 were RMB236.9 million (US$34.7 million), which represented an increase of 7.8% from RMB219.8 million for the same period in 2009. As a percentage of total revenue, sales, marketing and distribution expenses increased to 51.6% for the first quarter of 2010 from 49.7% for the same period in 2009. This increase was due primarily to increased spending on promotional activities for products such as Bicun, Endu, Anxin and Yingtaiqing and increased expenses associated with market research.
General and administrative expenses were RMB67.2 million (US$9.9 million) for the first quarter of 2010, which represented an increase of 13.4% from RMB59.3 million for the same period in 2009. As a percentage of total revenue, general and administrative expenses increased to 14.7% for the first quarter of 2010 from 13.4% 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 RMB8.0 million (US$1.2 million) for the first quarter of 2010. Share-based compensation expenses for the first quarter of 2009 were RMB6.3 million.
Income from operations was RMB30.9 million (US$4.5 million) for the first quarter of 2010, which represented a decrease of 49.5% from RMB61.1 million for the same period in 2009.
Income tax expense for the first quarter of 2010 was RMB1.3 million (US$0.2 million), which was primarily comprised of the tax expense of RMB7.9 million (US$1.2 million) relating to our profitable subsidiaries. This amount was offset by recognition of tax credits of RMB5.8 million (US$0.8 million) relating to tax losses of certain subsidiaries.
Net income attributable to Simcere was RMB20.5 million (US$3.0 million) for the first quarter of 2010, compared to RMB48.2 million for the same period in 2009. Net margin, representing net income divided by total revenue, was 4.5% for the first quarter of 2010, compared to 10.9% for the first quarter of 2009.
Basic and diluted earnings per American Depository Share ("ADS") for the first quarter of 2010 were RMB0.37 (US$0.05) and RMB0.36 (US$0.05), respectively. One ADS represents two ordinary shares of the Company.
As of March 31, 2010, the Company had cash, cash equivalents and restricted cash of RMB332.4 million (US$48.7 million), compared to RMB458.1 million as of December 31, 2009.
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.
The preliminary unaudited financial information is subject to the completion of the annual impairment review of goodwill and intangible assets and the purchase price allocation in respect of the Company's acquisitions of Yanshen Biological Technology Stock Co., Ltd. ("Jiangsu Yanshen") in 2009 and is subject to change. Specifically, in the preliminary unaudited condensed consolidated information of income and balance sheets accompanying this press release, goodwill, intangible assets and other assets and liabilities recorded as a result of the Jiangsu Yanshen acquisition as of December 31, 2009 and March 31, 2010, respectively, are subject to change. These balances also do not reflect any potential adjustments or impairment charges, if any, and the Company is currently evaluating the impact of the events occurred in 2009 and 2010 since acquisition. Readers and investors are strongly advised to read all public announcements the Company has made in respect of Jiangsu Yanshen in 2009 and 2010.
SOURCE Simcere Pharmaceutical Group
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