China Pharma Holdings, Inc. (NYSE AMEX: CPHI) ("China Pharma" or the "Company"), a fully-integrated specialty pharmaceuticals company in China, today announced financial results for the year ended December 31, 2011.
Full Year Highlights
- Revenue increased 9% to $81.2 million in fiscal year 2011 from $74.4 million in fiscal year 2010.
- Income from operations was $22.0 million in fiscal year 2011 compared to $24.7 million in 2010, a decrease of $2.7 million, or 11%.
- Net income was $19.3 million in fiscal year 2011 compared to $23.4 million in 2010, a decrease of $4.1 million, or 18%. Earnings per common share was 44 cents per basic and diluted share in fiscal 2011 compared with 54 cent per share, a decrease of 18%.
- Gross profit margin was 36% in fiscal year 2011, a decrease from 41% in fiscal 2010.
"In 2011 we registered a moderate top line growth in a very challenging year for the pharmaceutical industry in China. Once again our diversified product portfolio demonstrated its robustness in a difficult environment," said Ms. Zhilin Li, China Pharma's Chairman and CEO. "The healthcare reform has produced encouraging results in improving the standards of living for people in China. The changes produced by the reform, however, have created pricing pressures on nearly all pharmaceutical products across the industry, and we expect this environment to continue for some time to come. Going forward, we expect the launches of new products such as Candesartan, our new hypertension drug, and Rosuvastatin, our generic version of Crestor, to enhance our profitability and growth opportunities. Commercializing exciting new drugs like our antibiotic combination drug, along with first-to-market generic medicines, is an important part of China Pharma's growth and profitability strategy."
Full Year Results
Revenues for the year ended December 31, 2011 were $81.2 million, up 9% from revenues of $74.4 million for the year ended December 31, 2010, reflecting higher sales in three out of four product categories.
The "Digestive Diseases" product group remains the Company's fastest growing revenue category in 2011, with sales increasing 33% to $12.4 million from $9.3 million in 2010. The strong performance of the Digestive Diseases product group primarily reflects incremental revenue from Tiopronin, and Compound Ammonium Glycyrrhetate, both prescribed for the treatment of Hepatitis and liver dysfunction diseases. Sales of "Anti-Viro/Infection & Respiratory" products, the Company's largest revenue category during 2011, grew 18% to $32.0 million from $27.1 million in 2010. The "CNS Cerebral and Cadio Vascular" product group ("CNS") generated sales of $25.8 million in 2011, representing an increase of 8% compared to sales of $23.9 million in 2010. We expect the upcoming new CNS products (namely Candesartan and Rosuvastatin) will further support the profitability and sales in this category once launched. Sales from the "Other" product category was $11.0 million in 2011 compared to $14.1 million in 2010, a decrease of 22%, as all products in this category encountered stronger competition this year compared to the last year.
Gross profit for the year ended December 31, 2011 was $29.0 million, compared to gross profit of $30.3 million in 2010, a decrease of 4%. Gross margin was 36% in 2011, compared to 41% for 2010, a decrease of five percentage points, reflecting pricing pressure during the year.
Selling, general and administrative expenses in 2011 were $7.2 million, or 8.8% of sales, compared to $5.6 million, or 7.5% of sales, in 2010. For the year ended December 31, 2011, the Company's bad debt expense was $0.1 million, compared to a bad debt expense of $0.5 million in 2010.
Operating income was $22.0 million in 2011 compared to $24.7 million in 2010, a decrease of 11%. The lower operating income in 2011 reflects lower gross margin and higher operating expenses.
For the year ended December 31, 2011, the Company paid income tax at a rate of approximately 15%. Income tax expense for the year ended December 31, 2011 was $3.4 million. While for the year ended December 31, 2010, our income tax was at a rate of approximately 11%, and our income tax expense was $2.7 million for the year ended December 31, 2010. The Company obtained "National High-Tech Enterprise" status from the PRC government in the fourth quarter of 2010. With this designation, the Company is entitled to a preferential tax rate of 15% from 2011 until 2013, which is notably lower than the statutory income tax rate of 25%.
Net income for the year 2011 was $19.3 million, or $0.44 per basic and diluted share, compared to $23.4 million, or $0.54 per basic and diluted share in 2010.
As of December 31, 2011, the Company had cash and cash equivalents of $4.1 million compared to $3.7 million as of December 31, 2010. Year-over-year, working capital increased to $97 million in 2011 from $79 million in 2010 and the current ratio rose to 8.0 times from 7.1 times.
Accounts receivable balance rose to $69.7 million in 2011 from $61.9 million at the end of 2010. The Company's management team continues to be focused on improving accounts receivable collection and expects to make further progress in the quarters to come.
For the year ended December 31, 2011, cash flow from operating activities was $5.2 million, as compared to $7.8 million in 2010. Most of this decline were due to lower net income and higher working capital usage from higher inventory levels and lower accounts payables in 2011 compared to 2010.
"In 2012, we anticipate adding new higher-margin revenue streams from our upcoming new products, which should help buffer some of the margin pressures coming from competitive pricing due to government healthcare reform policies. Overall we are optimistic that we have the right mix of products and new product pipeline to position China Pharma to benefit from China's unprecedented healthcare reform program," said Ms. Li. "We believe our success in 2012 and beyond will be defined by our differentiated products, promising pipeline, strong distribution network, and commercialization expertise."
As of December 31, 2011, China Pharma had various pipeline drugs in different stages of active development. Some of these are highlighted below:
- The Company originally submitted application for production approval of Candesartan, a front-line drug therapy developed for the treatment of hypertension, in 2010. The Company received request for additional procedures in the fourth quarter of 2011 and has since completed all newly requested procedures. We now expect SFDA to give us the final production approval by mid-year 2012.
- The Company completed clinical trials of Rosuvastatin, a generic form of Crestor, and is in the process of production approval.
- The Company completed Phase I clinical trials of its novel cephalosporin-based combination antibiotic in September 2010. We are currently conducting Phase II clinical trials for this drug.
- The Company is developing a medicine for the treatment of coronary heart disease. This product comes with a patented TCM formula and we are currently conducting Phase III clinical trials for this drug. We anticipate the completion of the clinical work for this product by year end 2012.
China Pharma Holdings, Inc.