2014

Simcere Pharmaceutical Group Reports Preliminary Unaudited Third Quarter 2012 Results

NANJING, China, Nov. 15, 2012 /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 September 30, 2012.

Highlights

  • Total revenue was RMB526.5 million (US$83.8 million) for the third quarter of 2012, compared to RMB501.0 million for the same period in 2011, representing an increase of 5.1%. For the first nine months of 2012, total revenue was RMB1,542.8 million (US$245.5 million), representing an increase of 0.9% from RMB1,529.5 million for the same period in 2011.
  • Gross margin for the third quarter of 2012 was 83.6%, compared to 84.6% for the same period in 2011. For the first nine months of 2012, gross margin was 83.2%, compared to 84.5% for the first nine months of 2011.
  • Income from operations was RMB32.9 million (US$5.2 million) for the third quarter of 2012, compared to RMB32.4 million for the same period in 2011, representing an increase of 1.6%. For the first nine months of 2012, income from operations was RMB117.7 million (US$18.7 million), which represented a decrease of 17.1% from RMB141.9 million for the same period in 2011.
  • Net income attributable to Simcere was RMB22.2 million (US$3.5 million) for the third quarter of 2012, a decrease of 34.8% from RMB34.0 million for the same period in 2011. For the first nine months of 2012, net income attributable to Simcere was RMB77.8 million (US$12.4 million), which represented a decrease of 42.7% from RMB135.6 million for the same period in 2011.

"In the third quarter of 2012, Simcere's revenue and gross margin fundamentally remained stable," commented Mr. Jinsheng Ren, Chairman of Simcere Pharmaceutical Group. "While sales of edaravone continued to face challenges, we were encouraged to see growth from our generic drugs such as Zailin. I am also pleased that Hongquan Liu, our new Chief Executive Officer, is leading Simcere's management team to improve Simcere's overall operations. I am confident that Simcere will benefit from Hongquan's experience and leadership."

Mr. Hongquan Liu, Executive Director and Chief Executive Officer of Simcere Pharmaceutical Group, commented, "With Simcere's robust product portfolio and leading R&D capabilities, I am confident that Simcere has significant potential for future growth. Moving forward, in order to improve profitability, Simcere's strategic priorities will include focusing on key products, optimizing our sales and marketing organization, strengthening cost control, and in particular reducing sales and marketing expense as a percentage of revenue."

2012 Third Quarter Financial Results

Total revenue for the third quarter of 2012 was RMB526.5 million (US$83.8 million), compared to RMB501.0 million for the same period in 2011, representing an increase of 5.1%. For the first nine months of 2012, total revenue was RMB1,542.8 million (US$245.5 million), representing an increase of 0.9% from RMB1,529.5 million for the same period in 2011.

The tables below set forth the Company's top 10 products by revenue for the three months ended September 30, 2012 and nine months ended September 30, 2012:

In Thousands  



Three months ended
September 30, 2012

Three months ended
September 30, 2011



RMB  

USD       

% of total  

RMB                 

% of total 

Change

Products   

Therapeutic Area        



revenue  


revenue


Edaravone 

Neuroscience

179,368

28,540

34.1%

192,001

38.3%

(6.6%)

Endu

Oncology

70,519

11,221

13.4%

77,992

15.6%

(9.6%)

Zailin        

Infectious Disease 

53,999

8,592

10.2%

28,971

5.8%

86.4%

Yintaiqing  

Inflammation

52,123

8,293

9.9%

42,364

8.5%

23.0%

Sinofuan    

Oncology           

40,667

6,471

7.7%

53,002

10.6%

(23.3%)

Jiebaishu   

Oncology           

19,047

3,031

3.6%

19,827

4.0%

(3.9%)

Biqi  

Gastroenterology                  

17,900

2,848

3.4%

28,432

5.7%

(37.0%)

Anxin        

Infectious Disease            

15,385

2,448

2.9%

9,374

1.9%

64.1%

Faneng      

Osteoporosis              

11,564

1,840

2.2%

10,705

2.1%

8.0%

Anqi

Infectious Disease                  

9,767

1,554

1.9%

10,725

2.1%

(8.9%)

Others       


56,144

8,933

10.7%

27,569

5.4%

103.6%

Total


526,483

83,771

100.0%

500,962

100.0%

5.1%



Nine months ended
September 30, 2012

  Nine months ended
September 30, 2011
 



        RMB        

        USD

% of total

         RMB        

% of total

Change

Products   

Therapeutic Area  



 revenue


revenue


Edaravone 

Neuroscience     

518,096

82,436

33.6%

598,664

39.2%

(13.5%)

Endu

Oncology    

193,647

30,812

12.5%

197,648

12.9%

(2.0%)

Zailin        

Infectious Disease    

175,661

27,950

11.4%

134,216

8.8%

30.9%

Yintaiqing  

Inflammation      

129,198

20,557

8.4%

128,998

8.4%

0.2%

Sinofuan    

Oncology           

121,640

19,355

7.9%

135,357

8.8%

(10.1%)

Biqi  

Gastroenterology     

66,620

10,600

4.3%

70,248

4.6%

(5.2%)

Jiebaishu   

Oncology           

53,781

8,557

3.5%

49,647

3.2%

8.3%

Anxin        

Infectious Disease  

45,674

7,267

3.0%

35,042

2.3%

30.3%

Anqi

Infectious Disease      

40,422

6,432

2.6%

45,635

3.0%

(11.4%)

Kechuanning        

Respiratory   

33,225

5,287

2.1%

28,917

1.9%

14.9%

Others                


164,862

26,232

10.7%

105,155

6.9%

56.8%

Total


1,542,826

245,485

100.0%

1,529,527

100.0%

0.9%

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

Gross margin for the third quarter of 2012 was 83.6%, compared to 84.6% for the same period in 2011. For the first nine months of 2012, gross margin was 83.2%, compared to 84.5%for the first nine months of 2011.

Research and development expenses for the third quarter of 2012 totaled RMB65.3 million (US$10.4 million) which represented an increase of 43.7% from RMB45.4 million for the same period in 2011. This increase was due primarily to the increased expenditure on on-going research and development projects, as well as a reduction of RMB13.6 million in government research and development grants recognized compared to the same period in 2011. As a percentage of total revenue, research and development expenses increased to 12.4% for the third quarter of 2012 from 9.1% for the same period in 2011. For the first nine months of 2012, research and development expenses totaled RMB168.5 million (US$26.8 million), compared to RMB128.1 million for the same period in 2011.

Sales, marketing and distribution expenses for the third quarter of 2012 were RMB306.1 million (US$48.7 million), which represented an increase of 5.1% from RMB291.3 million for the same period in 2011. As a percentage of total revenue, sales, marketing and distribution expenses was 58.1%, which was almost equal to the same period in 2011. For the first nine months of 2012, sales, marketing and distribution expenses were RMB856.3 million (US$136.2 million), which represented an increase of 1.4% from RMB844.5 million for the same period in 2011.

General and administrative expenses were RMB60.8 million (US$9.7 million) for the third quarter of 2012, which represented a decrease of 12.6% from RMB69.6 million for the same period in 2011. As a percentage of total revenue, general and administrative expenses decreased to 11.5% for the third quarter of 2012 from 13.9% for the same period in 2011. For the first nine months of 2012, general and administrative expenses were RMB181.6 million (US$28.9 million), which represented a decrease of 14.5% from RMB212.4 million for the same period in 2011.

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 RMB3.9 million (US$0.6 million) for the third quarter of 2012. Share-based compensation expenses for the third quarter of 2011 were RMB7.9 million. The decrease was primarily due to the expiration of the first and second batches of restricted shares. For the first nine months of 2012, share-based compensation expenses totaled RMB10.5 million (US$1.7 million), which represented a decrease of 54.5% from RMB23.0 million for the same period in 2011.

Income from operations was RMB32.9 million (US$5.2 million) for the third quarter of 2012, representing an increase of 1.6% from RMB32.4 million for the same period in 2011. The Company recorded other operating income of RMB24.8 million (US$3.9 million) in the third quarter of 2012 in connection with gain arising from the disposal of the controlling interest on one of our subsidiaries as part of the establishment of our equity joint venture with Merck. For the first nine months of 2012, income from operations was RMB117.7 million (US$18.7 million), which represented a decrease of 17.1% from RMB141.9 million for the same period in 2011.

Income tax expense for the third quarter of 2012 was RMB3.4 million (US$0.5 million), compared to income tax expense of RMB0.7 million for the same period in 2011. The increase was primarily attributable to the effect of the tax rate change on deferred tax assets of one of our subsidiaries which in the third quarter 2012 renewed the Advanced and New Technology Enterprises qualification for an additional three years retrospectively from January 1, 2012. For the first nine months of 2012, income tax expense was RMB6.3 million (US$1.0 million), compared to RMB6.5 million for the same period in 2011.

Net income attributable to Simcere was RMB22.2 million (US$3.5 million) for the third quarter of 2012, compared to RMB34.0 million for the same period in 2011. Net margin, representing net income attributable to Simcere divided by total revenue, was 4.2% for the third quarter of 2012, compared to 6.8% for the same period in 2011. For the first nine months of 2012, net income attributable to Simcere was RMB77.8 million (US$12.4 million), which represented a decrease of 42.7% from RMB135.6 million for the same period in 2011. Net margin for the first nine months of 2012 was 5.0%, compared to 8.9% for the same period in 2011.

Basic and diluted earnings per American Depository Share ("ADS") for the third quarter of 2012 were RMB 0.42(US$0.07) and RMB 0.42(US$0.07), respectively. Basic and diluted earnings per ADS for the first nine months of 2012 were RMB1.45 (US$0.23) and RMB 1.44 (US$0.23), respectively. One ADS represents two ordinary shares of the Company.

As of September 30, 2012, the Company had cash, cash equivalents and restricted cash of RMB152.3 million (US$24.2 million), compared to RMB262.6 million as of December 31, 2011.

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 third quarter of 2012 on Thursday, November 15, at 8:00 a.m. Eastern Time (Thursday, November 15 at 9:00 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for the third quarter of 2012 and to answer questions.

To access the conference call, please dial:

International toll:                        

+65.6723.9381

United States toll-free:                  

+1.866.519.4004

United States toll:                        

+1.718.354.1231

China Domestic toll:                    

800.819.0121

China Domestic mobile toll:        

400.620.8038

Hong Kong toll:                           

+852.2475.0994

Please ask to be connected to Q3 2012 Simcere Pharmaceutical Group Earnings Conference Call and provide the following passcode: 57347315.

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:

United States toll-free:                    

+1.866.214.5335

United States toll:                       

+1.718.354.1232

The passcode for replay participants is 57347315. 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.

Investor and Media Contacts:
Email: ir@simcere.com

 

In Nanjing:       

In the United States:

Jie Liu D'Elia    

Carly Westerman

Vice President   

Brunswick Group

Simcere Pharmaceutical Group 

Tel: 1-212-333-3810

Tel: 86-25-8556-6666*8857



In Beijing:                                 

Yue Yu

Brunswick Group

Tel: 86-10-5960-8600

In Hong Kong:

Joseph Lo Chi-Lun

Brunswick Group

Tel: 852-3512-5000 

 

Simcere Pharmaceutical Group

PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts expressed IN THOUSANDS, EXCEPT SHARE AND ADS DATA)

 


 

Three months ended September 30,


 

Nine months ended September 30,


2011

2012

2012


2011

2012

2012


RMB

RMB

USD


RMB

RMB

USD

Product revenue

500,962

526,483

83,771


1,529,527

1,542,826

245,485

Total revenue

500,962

526,483

83,771


1,529,527

1,542,826

245,485

Cost of materials and production

(77,311)

(86,183)

(13,713)


(237,545)

(259,136)

(41,232)

Gross profit

423,651

440,300

70,058


1,291,982

1,283,690

204,253









Operating expenses and other operating income:








Research and development

(45,410)

(65,259)

(10,384)


(128,139)

(168,501)

(26,811)

Sales, marketing and distribution

(291,296)

(306,134)

(48,710)


(844,546)

(856,292)

(136,248)

General and administrative

(69,562)

(60,793)

(9,673)


(212,360)

(181,615)

(28,897)

Other operating income*

15,000

24,789

3,944


35,000

40,439

6,434

Income from operations

32,383

32,903

5,235


141,937

117,721

18,731









Interest income

1,278

769

122


3,640

2,810

447

Interest expense

(11,903)

(15,499)

(2,466)


(31,308)

(55,361)

(8,809)

Foreign currency exchange gains (losses)

2,907

(239)

(38)


6,624

(842)

(134)

Other  income

6,668

3,996

636


14,190

8,185

1,302

 

Equity in losses of equity method affiliated company

(3,619)

(5,994)

(954)


(10,218)

(10,921)

(1,737)

Earnings  before income taxes

27,714

15,936

2,535


124,865

61,592

9,800









Income tax expense

(693)

(3,445)

(548)


(6,495)

(6,338)

(1,008)

Net Income       

27,021

12,491

1,987


118,370

55,254

8,792









Less: Net loss attributable to the noncontrolling interest

6,975

9,669

1,539


17,222

22,503

3,580

Net income attributable to Simcere

33,996

22,160

3,526


135,592

77,757

12,372









Earnings  per share attributable to Simcere:








Basic

0.32

0.21

0.03


1.27

0.72

0.11

Diluted

0.31

0.21

0.03


1.23

0.72

0.11









Earnings  per ADS attributable to Simcere:








Basic

0.64

0.42

0.07


2.54

1.45

0.23

Diluted

0.61

0.42

0.07


2.45

1.44

0.23









Weighted average number of common shares: Basic

107,000,955

106,517,423

106,517,423


106,905,528

107,592,694

107,592,694

Diluted

110,605,961

106,693,034

106,693,034


110,521,391

107,822,027

107,822,027

*  Other operating income in the third quarter amounting to RMB24.8 million (US$3.9 million) represents gain arising from the disposal of the controlling interest on one of our subsidiaries as part of the establishment of our equity joint venture with Merck. The gain recognized is subject to the completion of the valuation work and may be adjusted. 

 

 

Simcere Pharmaceutical Group

PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts expressed IN THOUSANDS)

 


December 31,

September 30,

September 30,


2011

RMB

2012

RMB

2012

USD





Assets




Current assets




Cash, cash equivalents and restricted cash

262,557

152,332

24,238

Bills receivable

814,822

658,545

104,784

Accounts receivable,net

462,050

410,220

65,272

Inventories

126,708

130,965

20,838

Other current assets

181,196

181,085

28,813

Total current assets

1,847,333

1,533,147

243,945

Property,plant and equipment,net

925,815

896,753

142,686

Land use rights

139,707

137,305

21,847

Goodwill and intangible assets, net

648,408

622,888

99,110

Investments in and advance to an affiliated company

91,355

130,396

20,748

Other non-current assets

81,499

92,982

14,795

Total assets

3,734,117

3,413,471

543,131

Liabilities




Current liabilities




Short-term borrowings and current portion of long-term  borrowings

 

816,150

 

685,000

 

108,993

Accounts payable

52,191

44,528

7,085

Bills payable

28,379

20,000

3,183

Other payables and accrued liabilities

565,827

435,738

69,332

Total current liabilities

1,462,547

1,185,266

188,593

Long-term borrowings, excluding current portion

-

2,000

318

Deferred tax liabilities

46,248

43,618

6,940

Other liabilities

31,625

32,399

5,155

Total liabilities

1,540,420

1,263,283

201,006

Shareholders' equity




Simcere shareholders' equity




Ordinary shares at par

8,532

8,299

1,320

Additional paid-in capital

954,750

861,817

137,127

Accumulated other comprehensive loss

(104,608)

(104,291)

(16,594)

Retained earnings

1,197,507

1,275,264

202,913

Total equity attributable to Simcere

2,056,181

2,041,089

324,766

Noncontrolling interest

137,516

109,099

17,359

Total shareholders' equity

2,193,697

2,150,188

342,125

Commitments and contingencies




Total liabilities and shareholders' equity

 

3,734,117

3,413,471

543,131

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 = RMB6.2848 on September 30, 2012 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



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