NANJING, China, Nov. 16 /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 September 30, 2009.

    Highlights
    -- Total revenue was RMB443.7 million (US$65.0 million) for the third
       quarter of 2009, compared to RMB443.4 million for the same period in
       2008.

    -- Gross margin for the third quarter of 2009 was 82.2%, compared to 78.4%
       for the same period in 2008.

    -- Income from operations was RMB29.0 million (US$4.3 million) for the
       third quarter of 2009, a decrease of 66.6% from RMB87.0 million for the
       same period in 2008.

    -- Net income attributable to Simcere was RMB16.4 million (US$2.4 million)
       for the third quarter of 2009, a decrease of 82.0% from RMB91.2 million
       for the same period in 2008.

Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere Pharmaceutical Group, commented: "Our sales and gross profit margins remained stable this quarter. However, lower sales in Endu, impacted by the restructuring of the sales team, and an increase in sales and marketing expenses for new to market drugs like Anxin and Sinofuan, caused a significant decrease in operating income.

"Looking forward, we will maximize the commercial opportunities presented by the upcoming changes in the national and local insurance catalogues, and continue our strategy of marketing existing key products within Simcere's strong product portfolio to drive mid-to-long term growth."

In October 2009, we increased our stake in Jiangsu Yanshen, a manufacturer of the Influenza A (H1N1) vaccine and became its controlling shareholder. We also acquired the manufacturing license of Rosuvastatin, an effective statin to treat high cholesterol and related conditions.

2009 Third Quarter Financial Results

Total revenue for the third quarter of 2009 was RMB443.7 million (US$65.0 million), compared to RMB443.4 million for the same period in 2008. For the first nine months of 2009, total revenue was RMB1,310.6 million (US$192.0 million), which represented an increase of 2.9% from RMB1,274.2 million for the same period in 2008.

Revenue from Endu, the Company's patented anti-cancer biotech product, amounted to RMB21.6 million (US$3.2 million) in the third quarter of 2009, which was 4.9% of the Company's product revenue for the third quarter of 2009 and represented a decrease of 60.2% from RMB54.4 million for the same period in 2008. For the first nine months of 2009, revenue from Endu totaled RMB90.2 million (US$13.2 million), which represented a decrease of 50.2% from RMB181.3 million for the same period in 2008.

Revenue from edaravone injection products under the brand names Bicun and Yidasheng totaled RMB191.1 million (US$28.0 million) for the third quarter of 2009, which was 43.5% of the Company's product revenue for the third quarter of 2009, and represented an increase of 20.4% from RMB158.8 million for the same period in 2008. For the first nine months of 2009, revenue from Bicun and Yidasheng totaled RMB533.7 million (US$78.2 million), which represented an increase of 16.4% from RMB458.4 million for the same period in 2008.

Revenue from Sinofuan, a 5-FU sustained release implant for the treatment of cancer, amounted to RMB36.0 million (US$5.3 million) for the third quarter of 2009, which was 8.2% of the Company's product revenue for the third quarter of 2009, and represented an increase of 114.6% from RMB16.8 million for the same period in 2008.

Revenue from other first-to-market products including Jiebaishu, a nedaplatin product, and Anxin, a biapenem injection for the treatment of serious infections, amounted to RMB8.7 million (US$1.3 million) for the third quarter of 2009, which was 2.0% of the Company's product revenue for the third quarter of 2009. For the first nine months of 2009, revenue from other first-to-market products totaled RMB27.6 million (US$4.0 million).

Revenue from other branded generic products amounted to RMB181.6 million (US$26.5 million), which was 41.4% of the Company's product revenue for the third quarter of 2009, and represented a decrease of 12.4% from RMB207.3 million for the same period in 2008. For the first nine months of 2009, revenue from other branded generic products totaled RMB551.3 million (US$80.8 million), which represented a decrease of 7.5% from RMB596.2 million for the same period in 2008.

Gross margin for the third quarter of 2009 was 82.2%, increased from 78.4% for the same period in 2008. For the first nine months of 2009, gross margin was 82.3%, increased from 81.0% for the same period in 2008.

Research and development expenses for the third quarter of 2009 totaled RMB32.8million (US$4.8 million), which represented an increase of 55.3% from RMB21.1 million for the same period in 2008. This increase was primarily due to increased research and development headcount as the Company continued to expand its research and development activities. As a percentage of total revenue, research and development expenses were 7.4% for the third quarter of 2009, compared to 4.8% for the same period in 2008. For the first nine months of 2009, research and development expenses totaled RMB82.9 million (US$12.1 million), compared to RMB52.1 million for the same period in 2008.

Sales, marketing and distribution expenses for the third quarter of 2009 were RMB247.2 million (US$36.2 million), which represented an increase of 27.0% from RMB194.7 million for the same period in 2008. As a percentage of total revenue, sales, marketing and distribution expenses were 55.7% for the third quarter of 2009, compared to 43.9% for the same period in 2008. This increase was primarily due to higher expenses from Endu sales team restructuring and increased expenses for new to market drugs such as Anxin and Sinofuan. For the first nine months of 2009, sales, marketing and distribution expenses were RMB702.5 million (US$102.9 million), which represented an increase of 26.1% from RMB557.2 million for the same period in 2008.

General and administrative expenses were RMB55.6 million (US$8.1 million) for the third quarter of 2009, which represented an increase of 24.6% from RMB44.6 million for the same period in 2008. As a percentage of total revenue, general and administrative expenses increased to 12.5% for the third quarter of 2009 from 10.1% for the same period in 2008. For the first nine months of 2009, general and administrative expenses were RMB165.8 million (US$24.3 million), which represented an increase of 19.6% from RMB138.6 million for the same period in 2008.

Share-based compensation expense, which was 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 employee was assigned to perform, totaled RMB5.8 million (US$0.8 million) for the third quarter of 2009. Share-based compensation expenses for the third quarter of 2008 were RMB6.5 million. For the first nine months of 2009, share-based compensation expenses totaled RMB17.7 million (US$2.6 million), which represented a decrease of 11.1% from RMB19.9 million for the same period in 2008.

Income from operations was RMB29.0 million (US$4.3 million) for the third quarter of 2009, which represented a decrease of 66.6% from RMB87.0 million for the same period in 2008. For the first nine months of 2009, operating income was RMB128.0 million (US$18.8 million), which represented a decrease of 55.0% from RMB284.3 million for the same period in 2008.

Income tax expense for the third quarter of 2009 was RMB4.7 million (US$0.7 million), compared to RMB1.5 million for the same period in 2008. The increase in income tax expense for the third quarter of 2009 was primarily due to the release of the valuation allowance utilized by the earnings of an operating subsidiary in the same period of 2008. For the first nine months of 2009, income tax expense was RMB8.8 million (US$1.3 million) compared to RMB36.3 million for the same period in 2008.

Net income attributable to Simcere was RMB16.4 million (US$2.4 million) for the third quarter of 2009, compared to RMB91.2 million for the same period in 2008. Net income margin was 3.7% for the third quarter of 2009, compared to 20.6% for the third quarter of 2008. For the first nine months of 2009, net income was RMB101.8 million (US$14.9 million), which represented a decrease of 65.9% from RMB298.4 million for the same period in 2008. Net margin for the first nine months of 2009 was 7.8% as compared to 23.4% for the same period in 2008.

Basic and diluted earnings per American Depository Share ("ADS") for the third quarter of 2009 were RMB0.29 (US$0.04) and RMB0.29 (US$0.04) respectively. Basic and diluted earnings per ADS for the first nine months of 2009 were RMB1.75 (US$0.26) and RMB1.73 (US$0.25) respectively. One ADS represents two ordinary shares of the Company.

As of September 30, 2009, the Company had cash, cash equivalents and restricted cash of RMB448.1 million (US$65.6 million), compared to RMB813.8 million as of December 31, 2008.

Financial Statements

The unaudited condensed consolidated statements of income and balance sheets accompanying this press release have been prepared by management using U.S. GAAP. These financial statements are not intended to fully comply with U.S. GAAP because they do not present all of the financial statements 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 and the section under "Financial Outlook" 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 third quarter 2009 on Monday, November 16, 2009 at 8 a.m. Eastern Time (Monday, November 16, at 9 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for third quarter 2009 and to answer questions.

    To access the conference call, please dial:

    United States toll-free dial-in number:   +1 800 706 7741
    International dial-in number:             +1 617 614 3471
    North China toll-free dial-in number:     +86 10 800 152 1490
    South China toll-free dial-in number:     +86 10 800 130 0399
    China toll free / Netcom:                 +86 10 800 852 1490
    Hong Kong dial-in number:                 +852 3002 1672

Please ask to be connected to Simcere's Q3 2009 earnings call and provide the following passcode: 32750293. 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 dial-in number:              +1 617 801 6888

The passcode for replay participants is: 77133325. 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 .

                         SIMCERE PHARMACEUTICAL GROUP
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
         (AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT SHARE AND ADS DATA)

                                        Three months ended September 30,
                                    2008              2009            2009
                                     RMB               RMB             USD

    Product revenue                441,214           439,015          64,313
    Other revenue                    2,184             4,720             691
    Total revenue                  443,398           443,735          65,004
    Cost of materials and
     production                    (95,925)          (79,045)        (11,580)
    Gross profit                   347,473           364,690          53,424

    Operating expenses:
    Research and
     development expenses          (21,126)          (32,808)         (4,806)
    Sales, marketing and
     distribution expenses        (194,731)         (247,241)        (36,219)

    General and administrative
     expenses                      (44,619)          (55,592)         (8,144)
    Income from operations          86,997            29,049           4,255

    Interest income                  8,303             1,885             276
    Interest expense                  (452)           (4,005)           (587)
    Foreign currency exchange
     gains                           3,147               122              18
    Other income                        --                --              --
    Earnings before income taxes    97,995            27,051           3,962


    Income tax expense              (1,454)           (4,662)           (683)
    Net Income                      96,541            22,389           3,279

    Less: Net income
     attributable to
     the noncontrolling
     interest                       (5,384)           (5,958)           (873)
    Net income attributable
     to Simcere                     91,157            16,431           2,406

    Earnings per share
     attributable to Simcere:
    Basic                             0.73              0.15            0.02
    Diluted                           0.72              0.14            0.02

    Earnings per ADS
     attributable to Simcere:
    Basic                             1.46              0.29            0.04
    Diluted                           1.44              0.29            0.04

    Weighted average number
     of common shares:
    Basic                      125,148,011       112,724,593     112,724,593
    Diluted                    126,261,753       114,929,639     114,929,639



                                        Nine months ended September 30,
                                    2008              2009            2009
                                     RMB               RMB             USD

    Product revenue              1,269,982         1,298,511         190,225
    Other revenue                    4,256            12,106           1,774
    Total revenue                1,274,238         1,310,617         191,999
    Cost of materials and
     production                   (242,002)         (231,478)        (33,910)
    Gross profit                 1,032,236         1,079,139         158,089

    Operating expenses:
    Research and development
     expenses                      (52,120)          (82,852)        (12,137)
    Sales, marketing and
     distribution expenses        (557,188)         (702,528)       (102,916)
    General and administrative
     expenses                     (138,601)         (165,779)        (24,286)
    Income from operations         284,327           127,980          18,750

    Interest income                 30,105             7,403           1,084
    Interest expense                (3,695)           (8,680)         (1,272)
    Foreign currency exchange
     gains                          41,226               350              51
    Other income                     1,104             1,092             160
    Earnings before income
     taxes                         353,067           128,145          18,773


    Income tax expense             (36,324)           (8,831)         (1,294)
    Net Income                     316,743           119,314          17,479

    Less: Net income
     attributable to
     the noncontrolling
     interest                      (18,303)          (17,469)         (2,559)
    Net income attributable
     to Simcere                    298,440           101,845          14,920

    Earnings per share
     attributable to Simcere:
    Basic                             2.39              0.87            0.13
    Diluted                           2.37              0.87            0.13

    Earnings per ADS
     attributable to Simcere:
    Basic                             4.77              1.75            0.26
    Diluted                           4.73              1.73            0.25

    Weighted average number
     of common shares:
    Basic                      125,066,634       116,466,445     116,466,445
    Diluted                    126,175,766       117,663,824     117,663,824




                         SIMCERE PHARMACEUTICAL GROUP
               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                       (AMOUNTS EXPRESSED IN THOUSANDS)

                                       December 31, September 30, September 30,
                                            2008          2009        2009
                                             RMB           RMB         USD
    Assets
    Current assets
    Cash, cash equivalents and
     restricted cash                       813,766       448,127      65,648
    Accounts and bills
    receivables, net                       748,997       629,730      92,252
    Inventories                             95,948       100,963      14,790
    Other current assets                    49,048        60,552       8,870
    Total current assets                 1,707,759     1,239,372     181,560
    Property, plant and equipment,
     net                                   463,059       527,253      77,240
    Land use rights                        114,624       112,766      16,520
    Goodwill and intangible
     assets, net                           453,455       432,290      63,328
    Investments in and advances
     to affiliated companies                    --       351,187      51,448
    Other assets                            39,325        44,144       6,467
    Total assets                         2,778,222     2,707,012     396,563
    Liabilities
    Current liabilities
    Short-term borrowings and
     current installments of long-
     term debt                               6,000        11,000       1,611
    Accounts payables                       25,219        25,971       3,805
    Bills payables                              --       100,000      14,649
    Other payables and accrued
     liabilities                           303,794       304,484      44,606
    Total current liabilities              335,013       441,455      64,671
    Long-term debt, excluding
     current installments                   62,000        57,000       8,350
    Deferred tax liabilities                59,358        57,040       8,356
    Other liabilities                       20,529        21,303       3,121
    Total liabilities                      476,900       576,798      84,498

    Equity
    Simcere shareholders' equity
    Ordinary shares at par                   9,624         8,770       1,285
    Additional paid-in capital           1,505,252     1,187,664     173,986
    Accumulated other comprehensive
     loss                                  (82,130)      (46,488)     (6,810)
    Retained earnings                      820,279       922,124     135,086
    Total Simcere shareholders'
     equity                              2,253,025     2,072,070     303,547
    Noncontrolling interest                 48,297        58,144       8,518
    Total equity                         2,301,322     2,130,214     312,065
    Commitments and contingencies
    Total liabilities and equity         2,778,222     2,707,012     396,563

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 = RMB6.8262 on September 30, 2009 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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