Lotus Pharmaceuticals Announces Second Quarter Fiscal 2011 Financial Results

BEIJING, Aug. 15, 2011 /PRNewswire-Asia-FirstCall/ -- Lotus Pharmaceuticals, Inc. (OTCBB: LTUS) ("Lotus" or the "Company"), a profitable developer, manufacturer and seller of medicine and drugs in the People's Republic of China ("PRC"), today announced its financial results for the quarter ended June 30, 2011. Summary financial data is provided below:

Second Quarter Financial Highlights

• Revenues for the three months ended June 30, 2011 decreased by 1.1% year-over-year to $18.7 million, down from $18.9 million in the second quarter of 2010
  • Wholesale revenues were $14.6 million, or 78% of total revenues
  • Retail revenues were $4.1 million, or 22% of total revenues

• Gross profit for the second quarter was $4.9 million, a decrease of 50.1% compared to $9.8 million in the second quarter of 2010. Gross margin was 26.1% and 51.8% for the three months ended June 30, 2011 and 2010, respectively

• Net income for the quarter decreased 71.9% to $1.8 million, compared to $6.3 million in the second quarter of 2010

• Earnings per diluted share were $0.06 for the quarter, compared with diluted EPS of $0.24 achieved in the same period a year ago

Mr. Zhongyi Liu, Chairman and CEO of Lotus, stated, "Our 2011 second quarter results, especially those of the wholesale segment, were negatively impacted by changes in the competitive landscape and increases in labor costs. Retail sales continue to deliver solid results with 19.2% growth in revenue versus the same period in 2010. The increase in the retail segment was driven primarily by our Over-the-Counter division's sales. Construction of our Beijing facility continues to progress, and we anticipate additional capacity for growth and significant efficiency improvements once we move into the new building by the end of the year."

Mr. Liu continued, "We plan to focus our capital expenditures in the foreseeable future on the completion of our Beijing facility and our core business in Beijing. Lotus has a well-established nationwide sales and distribution network, and strong product development capabilities. With the completion of our new headquarters, we believe we are well positioned with respect to the ongoing consolidation of the Chinese pharmaceutical industry."

Second Quarter Results of Operations

Revenues

Revenues for the quarter ended June 30, 2011 were $18.7 million, compared to $18.9 million in the second quarter of 2010. The decrease of 1.1%, or $0.2 million, was primarily due to decreased sales from the Company's wholesale distribution channel, partially offset by the growth in its retail sales segment. Wholesale revenue decreased 5.6% year-over-year to $14.6 million, or 78% of total revenues. Retail revenues increased 19.2% year-over-year to $4.1 million, or 22% of total revenues. The growth in the retail segment was mainly due to an increase in revenue from our direct sales to other Over-the-Counter drug stores in Beijing.

Gross Profit

Gross profit for the second quarter ended June 30, 2011 was $4.9 million or 26.1% of total net revenues, as compared to $9.8 million or 51.8% of total net revenues for the quarter ended June 30, 2010.  The decrease of 50.1%, or $4.9 million, was primarily attributable to lower product prices in 2011 compared to 2010.

Income from Operations

Operating income amounted to $1.8 million for the quarter ended June 30, 2011 as compared to operating income of $6.4 million for the second quarter of 2010. The decrease of 71.8%, or $4.6 million, was due largely to decreased gross profit.

Net Income

Net income for the quarter ended June 30, 2011 was $1.8 million as compared to $6.3 million for the quarter ended June 30, 2010, due to the reasons set forth above. Earnings per diluted share were $0.06 for the quarter, compared with diluted EPS of $0.24 for the second quarter of 2010.

Liquidity and Capital Resources

As of June 30, 2011, the Company's current assets were $7.2 million and current liabilities were $10.9 million. Cash and cash equivalents totaled $0.9 million as of June 30, 2011. The Company's shareholders' equity at June 30, 2011 was $ 97.2 million. The Company generated $6.7 million in cash from operating activities in the first half of fiscal 2011, compared to $8.9 million in the same period of 2010. The Company used $7.1 million cash for investing activities during the first half of fiscal 2011, compared to $11.8 million in the same period of 2010.

Recent Business Highlights

• The Company continues to make progress in the construction of its headquarters building in Chaoyang District, Beijing. Currently the project is in its final interior furnishing stage. Once completed, this state-of-the-art building will host the Company's GMP manufacturing facility, a storage warehouse, an R&D center, a sales and marketing center, and administrative offices, as well as employee apartments. The Company reiterates the plan to complete and move into the facility by the end of the year.

Business Outlook for 2011

Management expects that 2011 will be a transitional year for Lotus Pharmaceuticals, as the Company will be completing and moving into its new headquarters and shifting its focus to the wholesale business in Beijing and the surrounding areas. After the completion of the headquarters, the Company expects growth will resume, primarily driven by the wholesale business in Beijing starting in 2012.

Conference Call and Webcast

Management will host a conference call to discuss these financial results on Wednesday, August 17, 2011 at 10:00 a.m. EDT (7:00 a.m. PDT).

To participate in the call, please dial (877) 941-4774, or (480) 629-9760 for international calls, approximately 10 minutes prior to the scheduled start time.

A replay of the call will be available for two weeks from 1:00 p.m. EDT on August 17, 2011, until 11:59 p.m. EDT on August 31, 2011. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4466487.

About Lotus Pharmaceuticals, Inc.

Lotus Pharmaceuticals, Inc. is a profitable developer and producer of drugs and a licensed national seller of pharmaceutical items in the People's Republic of China (PRC). Lotus operates its business through its two controlled entities: Liang Fang Pharmaceutical, Ltd. and En Ze Jia Shi Pharmaceutical, Ltd. Lotus' current drug development is focused on the treatment of cerebro-cardiovascular diseases, asthma and diabetes. Liang Fang sells drugs directly and indirectly through its national sales channels to hospitals, clinics and drugs stores in 30 provinces of the PRC.

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission.

SOURCE Lotus Pharmaceuticals, Inc.