Lotus Pharmaceuticals Reports Strong Second Quarter 2010 Financial Results
BEIJING, Aug. 16 /PRNewswire-Asia-FirstCall/ -- Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company"), a growing developer, manufacturer and seller of medicine and drugs in the People's Republic of China (the "PRC"), reported today its financial results for the quarter and six months ended June 30, 2010.
Second Quarter ("Q2") 2010 Highlights and Developments:
-- Q2 diluted EPS of $0.12 vs. $0.10 for Q2 2009
-- Q2 net income increased 32% from Q2 2009 to $6.3 million
-- Q2 gross margin of 52.3% compared to 57.9% in Q2 of 2009
-- The Company attended the 63rd PHARMCHINA exhibition to strengthen customer relationships and attract new distributors. Through the event, the Company added three independent distributors in Guizhou, Gansu and Ningxia provinces and signed one year Supply Contracts with these distributors. In addition, the Company signed Over-the-Counter ("OTC") Drug Purchase Agreements with 11 drug manufacturers.
-- The Company received SFDA's approval for the anti-Asthma drug R- Bambuterol(R) Hydrochloride Tablets to commence clinical trials as a Class 1 New Drug under special/fast track review.
-- The board approved the extension of the contract term between Lotus Pharmaceuticals, Inc.'s wholly-owned foreign enterprise and two operating entities in China from 10 years to 30 years.
-- As of today, the Company has completed the pilot scale production of R- Bambuterol with sufficient active pharmaceutical ingredient and tablets for use in clinical trials I & II, an important step towards entering clinical trials.
-- The construction of Lotus' new building complex in Beijing continued, construction approximately 65% completed as of today.
-- Attended the Global Hunter Securities 2010 China Conference.
-- Terminated the Standby Equity Distribution Agreement with YA Global Master SPV LTD prior to obtaining any financing under the agreement to help protect against stock dilution.
-- In July, the board of directors unanimously approved a maximum of 3 million shares to be allocated to a stock incentive plan as a means to attract, retain and reward individuals who can contribute to the long term financial success of the Company.
-- The Company reaffirms FY2010 Revenue and Net Income Guidance and provides exact targets.
"During the first half of 2010, the value-added output of China's pharmaceutical industry increased 14.9% over the same period in 2009. China's investments in (i) providing medical insurance to over 90% of its population and (ii) improving quality of rural care contribute to the long-term growth opportunities over the course of the next ten years," commented Dr. Zhongyi Liu, Chairman and CEO of Lotus. "We implement our business strategies to align with China's medical reforms. We are working on upgrading our facilities. We also continue to deepen our customer relationships, and structure our high quality prescription drug offerings and services according to market opportunities."
"On one hand, we are now offering 20 different types of prescription drugs through our nationwide wholesales channels which are complimented by our over 60 performing independent distributors. On the other hand, in the direct sales to other drug stores in Beijing, we have had great success mainly because we are driven by the market demand in the Beijing area, and by our OTC sales team's excellent performance."
Net Revenues for the second quarter of 2010 increased 40% to $19.1 million from $13.6 million during the same period of 2009. Wholesale revenues, one of our revenue segments (which accounted for 67% of the Company's total revenues) increased 19% primarily due to the Company's five new prescription drugs covered by the National Health Insurance Program having established their market acceptance. They are both Western and TCM prescription drugs treating duodenal ulcer, chronic prostate infection, psoriasis, influenza and meridian pain, respectively. Retail revenues (which accounted for 32% of total revenues) increased 123% due to relatively fast growth in direct sales to OTC drug outlets in Beijing. Once our new 10,000 sqm storage facility is ready for use, we would be qualified for bidding through the centralized tender process for hospitals in Beijing.
Gross margins for the second quarter of 2010 decreased to 52.3% as compared to 57.9% in the second quarter of 2009. The decrease in gross profit margin was attributable to the increase in cost of sales as a higher percentage of total net revenues than during the prior year's period. The increase in cost of sales as a percentage of total net revenues is a result of reducing sales price per unit by increasing inventory turnover. The management reduced average sales prices per unit to speed up inventory turnover because our warehouse space was insufficient due to 1) the removal of one of the Company's warehouses during construction of our new facility in Beijing, and 2) humidity-related problems occurring in spring and summer that increased the need for warehouse space.
Total operating expenses for the second quarter of 2010 were $3.5 million, a 34% increase from the second quarter of 2009. The increase resulted from the increase of selling expenses mainly as a result of our increase of sales activities in relation to direct sales to OTC drug stores in Beijing, as well as increases in professional fees.
Net income for the second quarter of 2010 was $6.3 million, or $0.12 per diluted share, compared to $4.8 million, or $0.10 per diluted share, in the second quarter of 2009.
Financial Condition
Cash for operations and liquidity needs are funded through cash flows from operations. Cash and cash equivalents were approximately $1.1 million as of June 30, 2010. Current assets and current liabilities as of June 30, 20010, were $9.0 million and $7.8 million, yielding a current ratio of 1.1X. For the six months ended June 30, 2010, net cash provided by operating activities was approximately $8.9 million, which resulted primarily from the Company's organic growth and effective management of cash flow.
Six-Month Results
For the six-month period ended June 30, 2010, total revenues were $34.1 million, an increase of 34% from $25.5 million in the same period last year. Gross profit was $18.7 million, up 28.8% from gross profit of $14.5 million for the six months of 2009. Gross margin was 54.9 %, compared to 57.1% for the first six months of 2009. Operating income was $12.1 million, compared to $9.5 million for the six months ended June 30, 2009.
Net income for the period was $11.3 million, an increase of 35% from $8.4 million during the same period last year. Earnings per share (diluted) for the first half of 2010 was $0.21, as compared to $0.17 in the first half of 2009.
Fiscal Year 2010 Guidance
Lotus both reiterates its prior guidance for the fiscal year 2010, and also provides exact guidance for the fiscal year 2010 due to its growth in the first half of 2010. Lotus expects net revenues to increase from approximately $57.8 million in 2009 to $73.6 million in 2010 and for net income to rise from $16.4 million in 2009 to $21.4 million in 2010.
About Lotus Pharmaceuticals, Inc. ( http://www.lotuspharma.com )
Lotus Pharmaceuticals, Inc. is a growing developer and producer of drugs and a licensed national seller of pharmaceutical items in the 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 disease, 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.
Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," "project," "intent," "forecast," "anticipate," "plan," "planning," "expect," "believe," "will likely," "should," "could," "would," "may," or words or expressions of similar meaning. Such statements are not guarantees of future performance and could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including, but not limited to, changes from anticipated levels of sales, future national or regional economic and competitive and regulatory conditions, changes in relationships with customers, access to capital, increased costs, difficulties in developing and marketing new products, marketing existing products, customer acceptance of existing and new products, the time to get new drugs approved by the State Food and Drug Administration and other factors. Additional information regarding risks can be found in the Company's Annual Report on Form 10K and its other filings with the SEC. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.
For more information, please contact:
Lotus Pharmaceuticals, Inc.
Yan Zeng, CFO
Tel: +86-10-6389-9868
Email: [email protected]
LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of
June 30, 2010 December 31, 2009
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $1,078,724 $3,945,740
Accounts receivable 5,044,427 1,784,194
Other receivable 16,200 16,132
Inventories 1,684,513 1,039,867
Prepaid expenses and other assets 1,146,203 856,691
Deferred debt costs -- 52,226
Total Current Assets 8,970,067 7,694,850
PROPERTY AND EQUIPMENT, net 28,105,096 16,223,775
OTHER ASSETS
Prepaid expenses 978,749 1,359,583
Deposits and Installments on
intangible assets 9,253,004 9,214,299
Intangible assets, net 49,218,003 49,888,428
Total Assets $96,524,919 $84,380,935
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $138,491 $427,924
Other payables 1,528,432 2,262,760
Taxes payable 3,739,362 3,131,908
Unearned revenue 646,967 1,163,771
Due to related parties 1,776,616 1,490,649
Series A convertible redeemable
preferred stock, $.001 par value;
10,000,000 shares authorized;
684,176 and 4,967,959 shares
issued and outstanding at June
30, 2010 and December 31, 2009,
respectively, net of discount -- 4,170,572
Total Current Liabilities 7,829,868 12,647,584
LONG-TERM LIABILITIES:
Due to related parties 856,843 866,102
Notes payable - related parties 5,090,316 5,069,023
Total Liabilities 13,777,027 18,582,709
STOCKHOLDERS' EQUITY:
Preferred stock ($.001 par value;
10,000,000 shares authorized;
684,176 and 4,967,959 shares
issued and outstanding
at June 30, 2010 and December 31,
2009, respectively) 684 --
Common stock ($.001 par value;
200,000,000 shares authorized;
53,377,185 and 47,306,332 shares
issued and outstanding at June 30,
2010 and December 31, 2009,
respectively) 53,377 47,306
Additional paid-in capital 21,006,861 15,649,328
Statutory reserves 6,240,202 5,674,324
Retained earnings 50,751,338 40,066,036
Accumulated other comprehensive
income 4,695,430 4,361,232
Total stockholders' Equity 82,747,208 65,798,226
Total Liabilities and
Stockholders' Equity $96,524,235 $84,380,935
LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2010 2009 2010 2009
NET REVENUES:
Wholesale $12,746,132 $10,673,718 $24,244,218 $19,614,123
Retail 6,160,361 2,759,419 9,412,753 4,896,607
Other revenues 198,508 198,592 396,942 945,286
Total Net
Revenues 19,105,001 13,631,729 34,053,913 25,456,016
COST OF SALES 9,105,751 5,743,166 15,349,380 10,929,324
GROSS PROFIT 9,999,250 7,888,563 18,704,533 14,526,692
OPERATING EXPENSES:
Selling expenses 2,375,159 1,801,235 4,544,112 3,503,034
General and
administrative 1,075,348 769,103 2,097,205 1,516,309
Total
Operating
Expenses 3,450,507 2,570,338 6,641,317 5,019,343
INCOME FROM OPERATIONS 6,548,743 5,318,225 12,063,216 9,507,349
OTHER INCOME
(EXPENSE):
Debt issuance
costs -- (99,516) (52,226) (199,033)
Interest income 906 44,793 2,186 46,112
Interest expense (59,428) (470,551) (491,830) (918,648)
Total Other
Income
(Expense) (58,522) (525,274) (541,870) (1,071,569)
INCOME BEFORE INCOME
TAXES 6,490,221 4,792,951 11,521,346 8,435,780
INCOME TAXES 167,959 7,418 270,166 82,145
NET INCOME $6,322,262 $4,785,533 $11,251,180 $8,353,635
COMPREHENSIVE INCOME:
NET INCOME 6,322,262 4,785,533 11,251,180 8,353,635
OTHER
COMPREHENSIVE
INCOME:
Foreign
currency
translation
gain 323,270 2,896 334,198 65,007
COMPREHENSIVE INCOME $6,645,532 $4,788,429 $11,585,378 $8,418,642
NET INCOME PER COMMON
SHARE:
Basic $0.12 $0.11 $0.22 $0.19
Diluted $0.12 $0.10 $0.21 $0.17
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 53,006,376 43,527,669 51,292,302 43,289,189
Diluted 53,869,385 49,562,146 53,676,675 49,183,956
LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended
June 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,251,180 $8,353,635
Adjustments to reconcile net income
from operations to net cash
provided by operating activities:
Depreciation and amortization 889,539 725,308
Amortization of deferred debt
issuance costs 52,226 199,033
Amortization of discount on
convertible redeemable preferred
stock 151,553 600,669
Amortization of prepaid expense
attributable to warrants -- 14,849
Interest expense attributable to
beneficial conversion feature of
preferred shares 184,660 --
Stock-based compensation 229,950 109,334
Recognition of unearned revenue -- (396,450)
Changes in assets and liabilities:
Accounts receivable (3,240,293) 4,008,383
Inventories (637,828) 1,017,856
Prepaid expenses and other
current assets 354,472 2,101,008
Accounts payable and accrued
expenses 175,027 (22,506)
Other current payables (740,967) (169,743)
Taxes payable 592,024 (863,589)
Unearned revenue (519,697) 541,327
Due to related parties 166,492 118,685
NET CASH PROVIDED BY OPERATING
ACTIVITIES 8,908,338 16,337,799
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on intangible assets -- (8,621,660)
Purchase of property and
equipment (11,780,895) (7,166,057)
NET CASH USED IN INVESTING ACTIVITIES (11,780,895) (15,787,717)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET CASH PROVIDED BY FINANCING
ACTIVITIES -- --
EFFECT OF EXCHANGE RATE ON CASH 5,541 1,476
NET (DECREASE) INCREASE IN CASH (2,867,016) 551,558
CASH - beginning of period 3,945,740 1,278,808
CASH - end of period $1,078,724 $1,830,366
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $-- $--
Income taxes $3,746 $--
Non-cash investing and financing
activities:
Common stock issued for services $397,050 $258,000
Common stock issued for
conversion of convertible
redeemable preferred stock $4,048,200 $150,000
Increase in payable for
construction-in-progress $-- $293,520
Convertible redeemable preferred
stock reclassified to permanent
equity $595,233 $--
Convertible redeemable preferred
stock issued for dividend payable $321,308 $400,000
SOURCE Lotus Pharmaceuticals, Inc.
Share this article